Oil prices dropped about $1 per barrel Tuesday after a key OPEC member left open the possibility that the oil cartel will increase output and one energy agency lowered its demand forecast.
Light, sweet crude for December delivery fell $1.15 to $93.47 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. In London, December Brent crude fell 82 cents to $91.16 a barrel on the ICE Futures exchange.
Saudi Arabia’s Oil Minister Ali Naimi said Tuesday that the Organization of Petroleum Exporting Countries will not discuss output levels at the group’s upcoming summit in Riyadh, Saudi Arabia, but he left open the possibility that production could be discussed at a meeting next month.
”There is absolutely not going to be talk of a supply increase during the summit,” Naimi said, according to Dow Jones Newswires.
”We will discuss it in December” in Abu Dhabi, United Arab Emirates, he said, adding that the group ”might increase” production.
The long-term impact of another increase in oil production by OPEC isn’t clear. A previous 500,000 barrel a day increase in production, which went into effect Nov. 1, was widely viewed as too little, too late to stop crude’s run-up to near $100 a barrel. Crude prices rose 42 percent between late August and last week, when they reached a record of $98.62 a barrel.
Oil prices were dampened as well by worries over the U.S. economy after Wall Street fell again Monday on expectations of further fallout from the ongoing credit crisis. The Dow Jones industrials ended below 13,000 for the first time since August.
Oil prices could be volatile this week due the expiration of crude options on Tuesday and the expiration of the December crude contract Friday.
The International Energy Agency on Tuesday issued its monthly report on crude supplies and demand, revising downward its expectations about oil demand. For the fourth quarter of this year, refinery crude throughput is expected to average 73.5 million barrels a day, Dow Jones Newswires reported.
This was a downward revision of 700,000 barrels a month on October’s report, which the IEA attributed to ”expectations for weaker fourth-quarter demand from countries within the Organization for Economic Cooperation and Development, heavier-than-expected refinery maintenance and higher unplanned refinery downtime.”
Analyst Olivier Jakob at Switzerland’s Petromatrix said the IEA data could add uncertainty to any hoped-for OPEC output increases.
”The downward revisions in demand … will leave market participants in a greater guessing game as to whether a further increase in OPEC is likely or not at the Dubai meeting,” Jakob said.
The market is also awaiting the U.S. Energy Department’s weekly inventory report on Thursday.
The report is expected to show that U.S. crude oil inventories fell 300,000 barrels last week, according to the average estimate of analysts polled by Dow Jones. Gasoline inventories, on average, likely fell 100,000 barrels, while distillate stocks were expected to fall 300,000 barrels. Refinery use likely rose 0.7 percentage point to 86.9 percent of capacity.
Heating oil futures fell 2.01 cents to $2.5620 a gallon (3.8 liters) while gasoline prices fell 2.36 cents to $2.3929 a gallon. Natural gas futures rose 1.1 cents to $7.972 per 1,000 cubic