Oil prices weaken as OPEC meets on output

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World oil prices fell on Wednesday, dampened by eurozone worries and falling shares, as OPEC ministers began a production meeting which was widely expected to maintain output, traders said.

Later in the day, traders will also digest the latest snapshot of energy inventories in the United States -- the world's top crude consuming nation.

In late morning trading, the price of Brent North Sea crude for delivery in January dipped 81 cents to $108.69 a barrel.

New York's main contract, light sweet crude for January, eased 52 cents to $99.62 per barrel.

"Today's OPEC meeting is expected to steal all the attention today," said VTB Capital analyst Andrey Kryuchenkov.

"As before, we expect no changes to current output levels, but renewed calls for better compliance and, perhaps, a formalisation of the current production for OPEC11 plus Iraq near 30mbpd."

The Vienna-based organisation, which supplies a third of the world's crude, has had an output target of 24.84 million barrels per day (mbpd) for three years.

The 12-member cartel may decide to trim its actual production, which stands above the agreed ceiling, as OPEC hawks Venezuela and Iran seek to keep oil prices high.

The International Energy Agency (IEA) said Tuesday that OPEC in fact produced 30.68 mbpd last month as the cartel's kingpin Saudi Arabia pumped out extra crude despite Libya making progress towards returning to pre-war output.

The IEA's OPEC output estimate includes crude supply from Iraq, which is not part of the cartel's official production quota because of unrest in the country.

Excluding production from Iraq, the IEA estimated that the cartel's other 11 member nations together pumped out 27.97 mbpd of oil in November -- still above the OPEC ceiling.

The OPEC cartel meets periodically to set production levels, in the hope that its decisions result in favourable market oil prices for its 12 members.

Crude futures 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 program, 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.

Oil also won support Tuesday from a positive economic sentiment reading on a closely-watched German index.


© 2011 AFP

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