Oil Prices Drop About $1 a Barrel
Tuesday November 13, 6:58 am ET
By Pablo Gorondi, Associated Press Writer Oil Prices Drop on
Possibility OPEC Will Increase Output, IEA Forecast of Lower Demand Oil
prices dropped about $1 per barrel Tuesday after a key OPEC member left open
the possibility that the oil cartel will increase output and one energy agency
lowered its demand forecast. Light, sweet crude for December delivery fell
$1.15 to $93.47 a barrel in electronic trading on the New York Mercantile
Exchange by midday in Europe. In London, December Brent crude fell 82 cents to
$91.16 a barrel on the ICE Futures exchange.
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Saudi Arabia's Oil Minister Ali Naimi said Tuesday that the Organization of
Petroleum Exporting Countries will not discuss output levels at the group's
upcoming summit in Riyadh, Saudi Arabia, but he left open the
possibility that production could be discussed at a meeting next month.
"There is absolutely not going to be talk of a supply increase during the
summit," Naimi said, according to Dow Jones Newswires. "We will discuss it in
December" in Abu Dhabi, United Arab Emirates, he said, adding that the group
"might increase" production. The long-term impact of another increase in oil
production by OPEC isn't clear. A previous 500,000 barrel a day increase in
production, which went into effect Nov. 1, was widely viewed as too little, too
late to stop crude's run-up to near $100 a barrel. Crude prices rose 42 percent
between late August and last week, when they reached a record of $98.62 a
barrel. Oil prices were dampened as well by worries over the U.S. economy
after Wall Street fell again Monday on expectations of further fallout from the
ongoing credit crisis. The Dow Jones industrials ended below 13,000 for the
first time since August. Oil prices could be volatile this
week due the expiration of crude options on Tuesday and the expiration of the
December crude contract Friday. The International Energy Agency on Tuesday
issued its monthly report on crude supplies and demand, revising downward its
expectations about oil demand. For the fourth quarter of this year, refinery
crude throughput is expected to average 73.5 million barrels a day, Dow Jones
Newswires reported. This was a downward revision of 700,000 barrels a month
on October's report, which the IEA attributed to "expectations for weaker
fourth-quarter demand from countries within the Organization for Economic
Cooperation and Development, heavier-than-expected refinery maintenance and
higher unplanned refinery downtime." Analyst Olivier Jakob at Switzerland's
Petromatrix said the IEA data could add uncertainty to any hoped-for OPEC
output increases. "The downward revisions in demand ... will leave market
participants in a greater guessing game as to whether a further
increase in OPEC is likely or not at the Dubai meeting," Jakob said. The
market is also awaiting the U.S. Energy Department's weekly inventory report on
Thursday. The report is expected to show that U.S. crude oil inventories fell
300,000 barrels last week, according to the average estimate of analysts polled
by Dow Jones. Gasoline inventories, on average, likely fell 100,000 barrels,
while distillate stocks were expected to fall 300,000 barrels. Refinery use
likely rose 0.7 percentage point to 86.9 percent of capacity. Heating oil
futures fell 2.01 cents to $2.5620 a gallon (3.8 liters) while gasoline prices
fell 2.36 cents to $2.3929 a gallon. Natural gas futures rose 1.1 cents to
$7.972 per 1,000 cubic feet.
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