Oil prices fall amid chatter on OPEC output hike

Rising oil prices, together with higher agricultural and mineral commodity prices, are pushing inflation rates up. (AGENCIES)

World oil prices after Opec kingpin Saudi Arabia said the cartel may raise its crude output to meet an increase in demand this year.

New York's main contract, light sweet crude for delivery in March, fell for the fifth straight session amid speculation that supplies may rise.

The benchmark contract dropped $1.24 from Friday to $87.87.

In London, Brent North Sea crude for March settled 99 cents lower at $96.61.

The Organisation of the Petroleum Exporting Countries (Opec) could raise output to meet a "two per cent" increase in demand during 2011, Saudi's oil minister Ali Al Naimi said on Monday.

As non-Opec oil producers are expected to increase output, Opec countries will also have the opportunity "to boost their supplies to the global market to meet the rising global demand," said Naimi.

Speaking at the Annual Global Competitiveness Forum in Riyadh, Naimi added that he expected average oil prices to be around last year's level of $80 despite a recent spike towards $100 a barrel in London.

"I expect prices to remain at the same level as last year," said Naimi, whose country is the biggest oil producer in Opec.

Michael Fitzpatrick of the Kilduff Report said that demand conditions were more moderate than in early 2003, when Opec started to increase supply and demand snapped up every drop.

"They have little to worry about this time with Europe's and America's recoveries sputtering and China enacting fiscal tightening combining to create the knowledge that the approaching $100 mark is probably unsustainable," Fitzpatrick said.

Also on Monday, the Centre for Global Energy Studies said that "without more oil from OPEC, oil prices will continue to rise in 2011," adding that crude futures could reach an average of $100 a barrel this year.

"The extent of the increase will depend on how robust oil demand growth turns out to be in the face of prices that now appear very likely to average more than $100 per barrel," the London-based research group said in its latest monthly report.

It added that as long as Asian oil demand grew, Opec was unlikely to hike output to help bring down prices and it warned that more expensive commodities risked harming a fragile economic recovery.

"Rising oil prices, together with higher agricultural and mineral commodity prices, are pushing inflation rates up, risking the imposition of higher interest rates on economies that are still struggling to emerge from the deepest recession since the Great Depression of the 1930s," it said.

Oil prices "are breaking key levels around 88 dollars," said Rich Ilczyszyn, at Lind-Waldock.
"In this time of the year we start to sell off a bit we are taking a wait-and-see mode."

 

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