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Oil prices down despite announced OPEC cut
AFP
NEW YORK
Petroleumworld.com 10 12 06
Crude prices here hit their lowest level of the year Wednesday as traders brushed off an OPEC announcement that cartel members would slash their oil output next month.
New York's main contract, light sweet crude for delivery in November, lost 93 cents to close at 57.59 dollars a barrel. It had dropped as low as 57.48 dollars, its worst point since December 27.
In London, Brent North Sea crude for November delivery slid 69 cents to a settlement of 58.65 dollars a barrel. The contract was off a low of 58.53, the lowest level since mid-February.
Nigerian Oil Minister Edmund Daukoru, who currently heads the Organization of the Petroleum Exporting Countries, said the cartel's 11 nations had agreed to slash output by a combined million barrels per day (bpd) from November.
"Our position to cut one million bpd has received consensus. All members have agreed," he told AFP.
But the OPEC secretariat in Vienna, questioned by AFP, could not immediately confirm that an accord had been struck. And some analysts said OPEC kingpin Saudi Arabia had given conflicting messages.
"It is now a question of credibility. Does OPEC have any? Did they ever have any?" queried Alaron Trading analyst Phil Flynn.
"Is OPEC doing serious damage to its reputation by playing games with the latest on-again, off-again production cut?"
Barclays Capital analyst Kevin Norrish said that OPEC's latest output moves were murky.
"There is no clarity as yet over the amount of oil to be cut, by whom and from what levels," Norrish said.
"The market appears to be interpreting this as a lack of determination to actually cut production, resulting in further price weakness."
Daukoru told AFP in Lagos that OPEC members, whose agreed production ceiling is now 28 million bpd, could decide on the exact breakdown for the reduction later Wednesday.
But earlier in the day a source close to the OPEC chief, asking not to be named, had said the cartel would not convene an emergency meeting to endorse a production cut.
The oil market has been waiting more than two weeks for a clear signal from OPEC in reaction to a 25 percent plunge in crude prices from summer highs above 78 dollars a barrel.
Sucden analyst Michael Davies said the market was not "very impressed" by the OPEC proclamations, since many of its members "were already producing less than their quotas".
In other market news, the International Energy Agency shaved Wednesday its forecast for growth of global oil demand this year and next.
The IEA said in its monthly report that a possible OPEC output cut, global instability and growth in China were likely to keep the market under tension, even though prices had fallen because of stockbuilding and slowing demand.
The agency forecast an increase of 1.2 percent in global oil demand this year to 84.6 million bpd and a 1.7-percent rise in 2007 to 86.0 million, down a touch from previous estimates.
Traders were looking ahead to a weekly update on energy inventories from the US government on Thursday, a day later than normal owing to Monday's Columbus Day holiday.
BMO Capital Markets energy analyst Bart Melek noted that abundant US inventories had been a major factor in the recent decline in oil prices, and cast doubt on the effects of any cut in OPEC output.
He also noted the dilemma facing Saudi Arabia, which is loath to destabilise slowing growth in the United States by trying to drive oil prices higher.
"First, an immediate and very aggressive reduction will signal that OPEC is panicking," Melek said.
"Second, a bigger cut now could lift prices at a time the US economy is slowing, taking away one of the only major supports for the US economy and oil demand."
AFP 11 2129 GMT 10 06
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