Oil prices slide on Saudi comments

12th October 2010, Comments 0 comments

World oil prices shed almost one dollar on Tuesday, after comments by the Saudi Arabian oil minister that he was happy with current price levels, ahead of this week's OPEC output meeting.

The market was also pulled lower by the strengthening dollar and a gloomy economic outlook contained in OPEC's monthly market report.

In early afternoon trade, New York's main contract, light sweet crude for November delivery, slid 95 cents to 81.26 dollars a barrel.

London's Brent North Sea crude for November fell 90 cents to 82.82 dollars a barrel.

"The OPEC meeting on Thursday is already casting a shadow," said Commerzbank energy analyst Carsten Fritsch.

"The Saudi Arabian oil minister gave some indication of the stance of the biggest OPEC producer yesterday, describing the oil market as well balanced and a price level of 70 to 80 dollars a barrel as appropriate."

The oil minister of key OPEC member Saudi Arabia, Ali al-Nuaimi, had said Monday he was "happy" with the current price of oil and saw no reason to change output quotas, as he arrived in Vienna on Monday for an OPEC meeting.

"Am I comfortable with the price? Yes," Nuaimi, the de-facto head of the Organisation of Petroleum Exporting Countries (OPEC), told journalists ahead of the cartel's gathering on Thursday.

"The price between 70 and 80 (dollars per barrel) is an ideal price," he added, noting that he was "happy" with the current situation.

Although oil prices were still above the 80-dollar mark on Monday after hitting five-month highs over 85 dollars last year, Nuaimi expressed satisfaction.

"We are comfortable with the whole market today, the situation in the market is very comfortable," he told journalists. "The economic growth of the world has been remarkable in 2010."

Oil prices also fell on Tuesday as traders took their cue from the strengthening dollar.

The European single currency dipped against the dollar as investors took profits before publication of minutes from the US Federal Reserve's latest monetary policy meeting, dealers said.

A stronger greenback makes dollar-priced crude more expensive for buyers using weaker currencies, and in turn this weighs on prices and tends to dent demand.

"It seems that crude oil prices are under pressure ... as the strengthening US dollar weighs on the oil market," said Sucden analyst Myrto Sokou.

Meanwhile on Tuesday, OPEC revised upwards its world oil demand growth estimate for 2010 to 1.3 percent, but held steady its forecast for next year.

"Despite some turbulence and setbacks, the global economic recovery continues to provide support for oil consumption," the cartel wrote in its October monthly bulletin.

The cartel said it was pencilling in world oil demand growth of 1.13 million barrels per day (bpd) or 1.34 percent to 85.59 million bpd for the whole of 2010, "driven by the stronger-than-expected, stimulus-led economic growth in the first half of the year."

In 2011, oil demand would then increase by a further 1.05 million bpd or 1.2 percent to 86.64 million bpd, unchanged from the previous forecast, OPEC predicted.

Sokou added: "The release of the OPEC monthly report added further pressure to the energy market as OPEC reported that the pace of the global economic recovery remains uncertain."

The powerful 12-nation OPEC cartel, which pumps about 40 percent of the world's crude oil, has had an official daily production level of 24.84 million barrels since January 2009.


© 2010 AFP

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