Oil Falls as OPEC Says Output Outpaces Demand; Metals Decline
bloomberg.com
May 15 (Bloomberg) -- Crude oil fell as officials from the Organization of Petroleum Exporting Countries, which pumps 40 percent of the world's oil, said demand is lagging behind supply and may drop. Other commodities also declined, led by copper and zinc.
Oil prices around $70 a barrel may slow global economic growth and demand for crude oil, Qatari Oil Minister Abdullah bin Hamad al- Attiyah said today. Producers are already oversupplying the market, with as much as 2 million barrels a day ``floating'' around in search of a home, he said today in Amman, the Jordanian capital.
Copper, which fell the most since October 2004, and zinc, with the largest daily drop since at least 1989, led a plunge in metals prices in London. Silver and gold also fell, as did shares of mining companies such as Anglo American Plc and Xstrata Plc.
``The global economy is down,'' said Rob Laughlin, a senior broker at Man Financial Ltd. in London. ``Metals are down, some equities are down, oil is following.''
Crude oil for June delivery fell as much as $2.22, or 3.1 percent, to $69.82 a barrel on the New York Mercantile Exchange. The contract traded at $70.20 at 2:04 p.m. in London. Brent crude oil for June fell $1.77 to $70.55 a barrel on the ICE Futures exchange in London.
U.S. stock-index futures fell on speculation government reports this week will show inflation has accelerated, making it more likely the Federal Reserve will raise interest rates. American stocks fell last week, pushing the S&P 500 to its biggest weekly decline since October, amid concern rates would go up.
An ``urgent reason could be the alarm being expressed in the swooning U.S. equity markets over rising commodity prices and their impact on inflation,'' Edward Meir, a commodity analyst at Man Financial in Darien, Connecticut, said in a report. Faster inflation will ``eventually lead to a slowdown in growth.''
OPEC Output
The International Energy Agency last week cut its 2006 forecast for growth in global oil demand to 1.5 percent, or 200,000 barrels a day, from 1.8 percent because of record-high fuel prices.
Crude oil prices also fell after Ali al-Naimi, the Saudi oil minister, said OPEC is adding enough new capacity even as some members struggle to meet current output targets. ``Supply is ahead of demand,'' he said today in Jordan.
Saudi Arabia opened its Haradh expansion facility in March. That increased the kingdom's capacity by 2.7 percent, the latest addition in a five-year period, to 11.3 million barrels a day.
Naimi said today high oil prices may slow economic growth. ``When prices are high, people check their pockets, and when prices are low they open their pockets,'' he said.
Political Tension
Oil remains 16 percent higher this year after unrest in Nigeria cut output in Africa's biggest oil producer by a fifth. Prices rose to a record $75.35 last month on concern the United Nations would impose sanctions on Iran, the world's fourth-largest oil producer. The UN Security Council meets May 19 to review the Iranian nuclear program and possible sanctions.
Iran will reject any plan based on suspending its nuclear program, President Mahmoud Ahmadinejad said yesterday. ``Any offer requiring us to suspend our peaceful nuclear activities will be invalid,'' Ahmadinejad told state-run Iranian News Agency IRNA.
The European Union will offer a ``bold'' plan to encourage Iran to curb its nuclear program, Agence France-Presse reported today, citing the EU foreign policy chief, Javier Solana. The package will address economic, nuclear and security matters, AFP said.
Nigeria, Africa's largest oil producer, expects by the end of next month to increase output 500,000 to 600,000 barrels a day, after restoring lost production in the Niger Delta, Ngozi Okonjo- Iweala, the country's finance minister, said yesterday.
Royal Dutch Shell Plc and some other oil producers cut output in Nigeria by as much as 631,000 barrels a day, more than a quarter of the country's production, because of attacks on pipelines and an export terminal in February.
As many as 200 people were killed last week when an oil pipeline near Lagos, Nigeria's most populous city, exploded and burst into flames, the Associated Press reported yesterday. |
