UPDATE 3-Oil drops as Saudi says more OPEC oil a done deal
Wednesday, July 7, 2004 3:37:35 PM
reuters.com
(Adds EIA comment, details, updates prices)
By F. Brinley Bruton
LONDON, July 7 (Reuters) - World oil prices fell on Wednesday after leading exporter Saudi Arabia said the OPEC oil cartel would go ahead with plans to increase output.
But predictions from the U.S. Energy Information Administration that U.S. oil would likely stay above $35 a barrel for the rest of the year lifted prices from intra-day lows.
Saudi Arabian Oil Minister Ali al-Naimi said the Organisation of the Petroleum Exporting Countries would proceed with an agreed 500,000 barrels per day (bpd) output hike in August, according to an industry newsletter.
U.S. light crude <CLc1> was down 45 cents to $39.20 a barrel, up from lows of $38.95.
London's Brent crude <LCOc1> fell 44 cents to $36.74, after gaining around $1 on Tuesday. Prices had hit lows of $36.51.
OPEC's decision to raise output was "not up for review", the Middle East Economic Survey quoted Naimi as saying.
The cartel had agreed to raise supplies by two million bpd from July and an additional 500,000 bpd from August to a total 26 million bpd. But some ministers have said the second stage of the increase would need to be confirmed at the group's next meeting in Vienna on July 21.
OPEC has been pumping near capacity this year -- members boosted production by 830,000 bpd in June from May, according to a Reuters survey -- and exceeded even its higher official limits for July and August.
Events in Iraq, which has the world's second-largest oil reserves, also pulled prices down.
The country's crude exports were running at about 1.7 million bpd following repairs to a pipeline feeding oil terminals at Basra and Khor al-Amaya, a shipping agent told Reuters.
Exports had been slashed to about one million bpd following attacks at the weekend.
U.S. PREDICTI0N
But the EIA's prediction that crude oil prices were set to stay relatively high supported the markets.
EIA chief Guy Caruso told the U.S. Congress during a morning hearing in Washington that the agency's forecasted crude oil prices easing slightly through third quarter, but that supplies would stay under pressure.
"The world market will still be tight, as world petroleum demand picks up seasonally in the fourth quarter, increasing the potential for unexpected upward price pressure (on oil) this winter," he said.
Traders also still fear that exports from Russia's top producer YUKOS <YUKO.MM>, which pumps a fifth of the country's oil, may be disrupted as it has less than a day to reach a deal over a $3.4 billion tax bill and avert a potential fire sale of assets.
Worries over union action in Nigeria would not give the market too much support since workers usually cannot afford to spend very much time out of work in the country, traders said.
Oil major Total's <TOTF.PA> 225,000 bpd of Nigerian oil production remained shut in as the company prepared to meet labour ministry officials over union protests, a spokeswoman said.
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