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Oil prices fall on reports OPEC may discuss output hike

Oil prices fall on reports OPEC may discuss output hike

Oil prices fell about US$2 a barrel Monday after reports that oil cartel OPEC would discuss increasing its output at an upcoming meeting in a bid to cool record crude prices.
Saudi Arabia's oil minister said Sunday that the Organization of Petroleum Exporting Countries would discuss the issue of boosting production to curb prices when it meets later this year.
"The comments by the Saudi oil minister on the weekend didn't necessarily say that they're going to increase production, it wasn't quite that extreme, but the mere fact that he's speaking aloud about it shows that the issue is there," said Tobin Gorey, commodity strategist at the Commonwealth Bank of Australia in Sydney.
Light, sweet crude for December delivery dropped US$2.40 to US$93.92 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Europe. In London, December Brent crude futures fell US$1.92 to US$91.26 a barrel on the ICE Futures exchange.
Reports of an attack an Exxon Mobil oil export terminal in Nigeria temporarily halted the slide, but company officials said oil operations were not disrupted in the attack and calm appeared to have been restored.
Heating oil futures fell 4.88 cents to US$2.5700 a gallon (3.8 liters) on the Nymex, while gasoline prices declined 5.89 cents to US$2.3971 a gallon. Natural gas futures fell 15.4 cents to US$7.743 per 1,000 cubic feet.
Oil prices had surged to near US$100 per barrel recently amid concerns about supplies, a weak U.S. dollar and OPEC's apparent reluctance to pump more crude into the market.
Many traders and analysts say the effect of any output hike on prices is likely to be limited as the recent rise in crude futures has had more to do with speculation than a real demand for Middle Eastern crude. OPEC's next policy meeting is set for Dec. 5 in Abu Dhabi.
Estimates of where crude prices will head from here vary. Many analysts expect prices to rise to at least US$100 a barrel, but a growing chorus is warning that futures are due for a sharp downturn soon.
Few analysts believe the underlying fundamentals of supply and demand support such high prices. Many blame speculative investing fueled by the weak dollar for oil's recent run-up. Oil futures offer a hedge against a weak dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the U.S. currency is falling.
Olivier Jakob at Petromatrix in Switzerland said "increased volatility ... could have at times more to do with option position management than with fundamentals."
William C. Ramsay, deputy executive director of the International Energy Agency, also identified speculators behind rising oil prices, saying they could be made to take their money elsewhere by better controlling energy demand and increasing conservation and supply.
"The speculators wouldn't be in the market if the underlying conditions of the market weren't advantageous to the speculators," Ramsay told reporters in Tokyo. "Our attitude is: fix the fundamentals."
Ramsay said oil-importing countries should work harder to stem the growth in demand through greater energy efficiency and conservation. Suppliers, meanwhile, should be more flexible about providing more oil to the market, he said.
"I think we can remove a good bit of the incentive for the speculators, and they can go speculate somewhere else," Ramsay said.
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Associated Press Writer Gillian Wong in Singapore contributed to this report.


Updated : 2021-10-25 21:04 GMT+08:00