Oil prices slump ahead of Opec meeting

Oil prices fell back below $90 a barrel on Friday amid speculation that the Organisation of the Petroleum Exporting Countries (Opec) will decide to increase its output at a meeting next week, analysts said.

New York’s main contract, light sweet crude for January delivery, fell $2,03 to close at $88,71 per barrel, after earlier striking a one-month low of $88,52.

In London, Brent North Sea crude for January tumbled $1,96to settle at $88,26 a barrel.

Opec meets in Abu Dhabi on Wednesday with many participants expecting the group to boost output to help counter record-breaking prices.

“All eyes will be on Opec now ahead of the group’s meeting on December 5,” said Nimit Khamar, analyst at the Sucden brokerage in London.

“Many expect the group to hike supplies in order to cool off prices.”

The oil cartel accounts for roughly 40% of the world’s crude output.

Opec last decided to raise production in September when it agreed to provide an extra 500 000 barrels a day to the market from November 1.

“The Nigerian oil minister suggesting that Opec would provide more oil in the event that the Canadian shutdown was an extended affair seemed to rekindle ideas that Opec might go ahead and increase production at their next meeting,” said Mike Fitzpatrick, an analyst at MF Global.

The Commonwealth Bank of Australia (CBA) said in a report to clients: “It appears that oil markets are considering the possibility that there will be an increase in Opec production ceilings of at least 0,5-million barrels per day.”

Earlier this week, Ali al-Nuaimi, oil minister of Opec kingpin Saudi Arabia, said the market was well-supplied and that high prices did not properly reflect supply and demand.

Since striking record peaks just under $100 last week, prices have slumped by about $10 in New York and almost $8 in London.

On Monday, however, prices staged a fresh assault on $100 on renewed supply concerns.

The market then tumbled owing to feverish speculation that Opec might ramp up output, amid news of a smaller-than-expected drawdown of US energy reserves.

The explosion on the pipeline linking Canada with the United States, which is the biggest energy consumer in the world, caused another spike.—Sapa-AFP

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