GO
Loading...

Oil Prices Fall; OPEC Gulf Members Favor Output Hike

Oil fell Monday after Gulf members of the Organization of Petroleum Exporting Countries said they favored raising production levels at the group's meeting this week.

U.S. light, sweet crude fell 35 cents lower at $76.35 a barrel by 1741 GMT, after falling to $75.52 earlier. London Brent crude dropped 42 cents to $74.65 a barrel.

U.S. oil is close to the record $78.77 a barrel on Aug. 1, and some analysts say additional OPEC oil would ease prices and supply concerns.

While some OPEC members have said they favor keeping output levels unchanged, the group's core Gulf oil producers said on Monday they want a modest output increase.

"They favor a small increase," said an OPEC source, speaking after informal talks between oil ministers of Saudi Arabia, Kuwait, Qatar and the United Arab Emirates ahead of OPEC's meeting Tuesday.

Saudi Arabia, the world's top exporter and OPEC's most influential member, has yet to express its opinion publicly. Iran, Nigeria and Venezuela have reiterated their stance against raising output.

"There is a little bit of talk that the Saudis may be influenced to push for a 0.5 million bpd increase," said Rob Laughlin, senior broker at MF Global.

Saudi Oil Minister Ali al-Naimi so far has declined to comment, and did not respond to a report by Washington-based consultancy PFC Energy saying Saudi Arabian sources signaled OPEC may need to boost output by up to 1 million barrels per day (bpd).

Saudi Arabia has told its customers in Asia and Europe it would keep its crude oil supplies steady for October from September levels.

Any increase would reverse some of the output cuts of 1.7 million bpd -- roughly 6 percent of supplies -- OPEC agreed last year.

Markets Remain Tight

Industrialized consumer nations have said crude oil stocks will shrink rapidly by next January if OPEC does not increase output.

"We think that the current market is very tight," said Nobua Tanaka, executive director of the International Energy Agency, which advises industrialized countries on energy issues.

Analysts also are concerned that turmoil in the world financial markets, triggered by problems in the U.S. mortgage sector, could tip the United States into recession and hit oil demand.

Payrolls in the United States shrank unexpectedly for the first time in four years last month, data showed on Friday, prompting concerns that credit market turmoil may become a drag on economic growth.

Oil was weaker on Monday ahead of an OPEC meeting in Vienna this week, where powerful Gulf oil producers favor a small increase in production.

The Organization of the Petroleum Exporting Countries' core Gulf oil producers want a modest increase in the organization's oil output.

"They favor a small increase," said an OPEC source, speaking after informal talks between oil ministers of Saudi Arabia, Kuwait, Qatar and the United Arab Emirates ahead of OPEC's meeting on Tuesday.

U.S. light, sweet crude for October delivery was lower, after falling more than a dollar at one stage. London Brent crude fell.

Some other OPEC members seem happy with the group's current output, but Saudi Arabia, the world's biggest exporter and OPEC kingpin, has yet to come clean on its views.

"There is a little bit of talk that the Saudis may be influenced to push for a 0.5 million bpd increase," said Rob Laughlin, senior broker at MF Global.

Saudi Oil Minister Ali al-Naimi has so far declined to make any comment as officials from OPEC countries arrived in Vienna for Tuesday's meeting.

He has not responded to a report by Washington-based consultancy PFC Energy saying Saudi Arabian sources signaled OPEC may need to boost output by up to 1 million barrels per day (bpd).

Any increase by OPEC would reverse some of the output cuts of 1.7 million bpd -- roughly 6% of supplies -- put in place since October 2006.

Officials from Iran, Nigeria and Venezuela have reiterated their stance against raising output.

Record Prices

An increase might help to ease upward pressure on oil prices, which are close to a record high of $78.77 a barrel set on Aug.1.

Industrialized consumer nations have argued that crude oil stockpiles will shrink rapidly by January next year if OPEC does not increase output.

"We think that the current market is very tight," said Nobua Tanaka, executive director of the International Energy Agency, which advises industrialized countries on energy issues.

Worries over shrinking crude oil supplies are clouded by doubts over the economic health of top consumer, the United States.

There are concerns that turmoil in the world financial markets, triggered by problems in the U.S. mortgage sector, could tip the United States into recession and hit oil demand.

Payrolls in the United States shrank unexpectedly for the first time in four years last month, data showed on Friday, prompting concerns that credit market turmoil may become a drag on economic growth.

Saudi Arabia has told its customers in Asia and Europe it would keep its crude oil supplies steady for October from September levels.

State oil firm Saudi Aramco told buyers it would continue to supply Asian customers with around 10% below their full contractual volume, as it has since April.

Saudi Arabia will also keep shipments steady to two European refiners, showing that it is still keeping a lid on supply. More than half of Saudi Arabia's crude heads to Asia.

The kingdom, key to any OPEC decision, pumped 8.65 million bpd of the cartel's total August production of 30.37 million bpd, Reuters data shows.

It also has the bulk of OPEC's spare production capacity.

Contact Oil and Gas

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    To learn more about how we use your information,
    please read our Privacy Policy.
    › Learn More