Oil falls on OPEC output concerns
Crude oil declined for a second day on speculation fuel inventories may remain high as supply from the Organization of Petroleum Exporting Countries outpaces the recovery in global demand.
Oil fell after Iran’s OPEC governor Mohammad Ali Khatibi said the market may be oversupplied later this year if the group, meeting March 17, fails to comply with output limits.
A report today may show industrial production in the US, the world’s biggest energy consumer, was little changed in February because of harsh weather, according to a Bloomberg survey of analysts.
“Global demand may be increased gradually this year but there’s plenty of available supply,” said Ken Hasegawa, a commodity derivatives sales manager at broker Newedge in Tokyo.
“We’ve already seen a $10 increase in the last one month so it’s a good time for a correction,” he said.
Crude oil for April delivery fell as much as 51 cents, or 0.6pc, to $80.73 a barrel in electronic trading on the New York Mercantile Exchange. It was at $80.74 at 2:28pm Singapore time. Futures have gained less than 2pc in 2010.
Oil dropped 1.1pc to $81.24 a barrel on March 12 after the Reuters/University of Michigan preliminary index of consumer sentiment unexpectedly declined for a second month.
Prices reached a two-month high of $83.16 that day after the International Energy Agency upgraded its 2010 forecast for oil demand and the US Commerce Department reported a surprise 0.3pc increase in February retail sales.
“The market has tightened but it’s still far from being tight,” said Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney. “We’re probably going to need evidence that the oversupply in the market has reduced further before we’re really going to move out of this range.”
OPEC, which pumps 40pc of the world’s oil, cut production quotas by a record 4.2 million barrels a day at the end of 2008 as demand plunged. The group will likely seek tighter compliance at this week’s meeting in Vienna, Khatibi told Press TV yesterday.
The 12 OPEC members bound by quotas, all except Iraq, produced 26.7 million barrels a day in February, the Paris-based IEA said March 12. Their compliance dropped to 56pc, from 58pc in January.
While the global economy has stabilized, fuel consumption in the US and Europe has yet to improve significantly, according to CWA’s Hassall.
Peak winter heating demand in the Northern Hemisphere has passed and the US holiday motoring season is still “a long way” off, he said.