Oil prices fell more than US$1 a barrel yesterday in Asia after reports that OPEC would discuss increasing its output at an upcoming meeting in a bid to cool record crude prices.
Prices were pressured lower following the comments on Sunday by Saudi Arabia, the world's biggest oil producer, and by fellow OPEC cartel member Kuwait, dealers said.
"OPEC has been unusually quiet during those sharp rises in oil prices over the past couple of weeks and so any talk of action out of OPEC would be calming news," said Victor Shum, an analyst with energy consultancy Purvin and Gertz.
PHOTO: AP
Saudi oil minister Ali al-Nuaimi told reporters during a short visit to Kuwait that talk of a hike in output was premature.
"When OPEC meets, we will discuss this issue," al-Nuaimi said, without specifying which meeting he was referring to.
OPEC is holding a summit in Riyadh on Saturday and Sunday, and ministers are also due to meet in Abu Dhabi on Dec. 5.
Kuwait's acting oil minister Mohammad al-Olaim said OPEC will "not hesitate to shoulder its responsibilities."
He said the cartel would be willing to increase output "if there is a need to raise production in accordance with market parameters."
"The comments by the Saudi oil minister on the weekend didn't necessarily say that they're going to increase production, it wasn't quite that extreme, but the mere fact that he's speaking aloud about it shows that the issue is there," said Tobin Gorey, commodity strategist at the Commonwealth Bank of Australia in Sydney.
Oil prices have surged to near US$100 per barrel recently amid concerns about supplies, a weak US dollar and OPEC's seeming reluctance to pump more crude into the market.
But al-Naimi also said Gulf producers could not control crude prices.
"Gulf countries do not control prices but they try as much as possible to secure supplies and market security," he said.
Many traders and analysts say the effect of any output hike on oil prices is likely to be limited as the recent rise in crude futures has had more to do with speculation than a real demand for Middle Eastern crude.
Light, sweet crude for December delivery dropped US$1.26 to US$95.06 a barrel in Asian electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract rose US$0.86 to settle at US$96.32 a barrel on Friday.
Prices could rise ahead of the expiration of options on December crude oil futures today, with investors holding a heap of US$100 call options.
Holders of the call options will enjoy a payout if prices hit US$100, but moderating or falling prices yesterday would send them scrambling to sell to limit their losses.
Estimates of where crude prices will head from here vary. Many analysts expect prices to rise to at least US$100 a barrel, but a growing chorus is warning that futures are due for a sharp downturn soon.
Few analysts believe the underlying fundamentals of supply and demand support such high prices. Many blame speculative investing fueled by the weak dollar for oil's recent run-up.
Oil futures offer a hedge against a weak dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the US currency is falling.
US Federal Reserve Chairman Ben Bernanke's remarks last week that the US economy would likely slow in the first part of next year remained a source of concern for traders, who fear energy demand would be affected, dealers said.
"With the cautionary comments coming last week from the US Federal Reserve about the fate of the US economy, that has provided a reason for traders to pull back the pricing," Shum said.
In London, December Brent crude futures fell US$0.73 to US$92.45 a barrel on the ICE Futures exchange.
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