Oil prices slump on strong dollar, OPEC decision
World oil prices slumped Wednesday as the euro tumbled close to a one-year dollar low on the back of the eurozone debt crisis, and after the OPEC cartel opted to keep oil output steady.
In late afternoon trading, the price of Brent North Sea crude for delivery in January dived $2.77 to $106.76 a barrel.
New York's main contract, light sweet crude for January, shed a hefty $3.23 to $96.91 per barrel.
The European single currency dived under $1.30 on Wednesday, hitting the lowest point since the start of the year on mounting concern about the eurozone debt crisis in the wake of last week's summit.
The euro sank to $1.2946, its lowest level since January 11. The stronger greenback makes dollar-denominated crude more expensive for buyers using weaker currencies, like the euro, and this tends to dampen oil demand and prices.
Across in Vienna, OPEC's 12 nations agreed to maintain current oil output of 30 million barrels per day, citing an uncertain outlook for energy demand.
However, OPEC has been producing far above its official output quota of 24.84 mbpd, which does not include output from Iraq due to the country's unrest, as members look to benefit from high oil prices.
"Oil prices have plunged after OPEC moved its maximum output ceiling in line with current levels of production, suggesting that the cartel saw little in the way of upward pressures on prices," said CMC Markets analyst Michael Hewson.
The Organization of Petroleum Exporting Countries (OPEC), whose dozen members together pump about one third of the world's oil supply, added that Iraq would take over the cartel's rotating presidency from Iran in 2012.
"In light of the foregoing and given the demand uncertainties, the conference decided to maintain the current production level of 30 million barrels per day, including production from Libya, now and in the future," OPEC said in a communique after a ministerial meeting.
The International Energy Agency (IEA) said on Tuesday that OPEC produced 30.68 mbpd last month as Saudi Arabia and Kuwait pumped out extra crude despite Libya making progress towards returning to pre-war output levels.
Excluding Iraq, the IEA estimates that the cartel's other 11 member nations together pumped 27.97 mbpd of oil in November, still above OPEC official quotas.
Crude oil prices had briefly spiked Tuesday on reports that the Iranian military planned exercises in the Gulf's strategic Strait of Hormuz.
Even though the reports on Iranian navy exercises were later denied by the Iranian foreign ministry, with tensions rising between the West and Tehran over its nuclear programme, traders were ready to jump at any rumour.
The Strait of Hormuz is particularly sensitive: much of the region's oil is transported through the narrow link between the Gulf with the Arabian Sea.
© 2011 AFP