New York: Crude oil prices eased from new highs approaching $140 a barrel Monday as the dollar fell against the euro and speculation mounted about Saudi Arabia’s intentions to increase output.
New York main oil futures contract, light sweet crude for July delivery, dipped 25 cents to close at $134.61 a barrel. In London, Brent North Sea crude for August delivery fell 40 cents to settle at $134.71. Both futures contracts struck all-time highs in intraday trading: $139.89 in New York and $139.32 in London.
Market speculation swirled ahead of Saudi Arabia’s unusual summit of oil producing and consuming nations, to be held Sunday in Jeddah to discuss runaway oil prices.United Nations secretary general Ban Ki-Moon said that Saudi Oil minister Ali al-Nuaimi had told him the desert kingdom, which has a quarter of the world’s proven oil reserves, would hike oil output by 200,000 barrels per day (bpd) in July.
He also quoted Nuaimi as saying that he felt oil-consuming countries should play their part to stabilize prices by reducing national taxes and combating speculators.
The largest oil producer in OPEC is currently producing 9.45 million bpd after announcing an increase of 300,000 bpd last month following a visit by U.S. president George W. Bush.
The Saudi increase report came amid growing pressure for more oil from the Organization of the Petroleum Exporting Countries cartel, which pumps about 40% of world output.
Finance chiefs of the Group of Eight industrialized nations have warned that spiraling oil prices threaten global economic growth and called on producers to open up the taps. They also tasked the International Monetary Fund to investigate speculation’s role in driving prices skyward.
The Bush administration, which has been pressing its ally for increased output, downplayed expectations for the Jeddah summit. “We are not expecting an outcome of this meeting to be additional pronouncements on production,” White House spokesman Tony Fratto told AFP.
Kevin Norrish at Barclays Capital said the reported increase in Saudi Arabia’s output, to 9.7 million bpd in July, would mark the highest monthly rate since August 1981. “However, in our view, the move does not seem to be enough to reverse the recent strength in prices, as it does little to repeal the longer-term expectations for tight demand-supply balances.”
Oil prices also were underpinned by the dollar’s decline against the euro, after record eurozone inflation data lifted prospects of an imminent interest rate hike. Dollar-denominated oil benefits from a declining dollar as investors seek a haven from inflation.
Energy subsidies in emerging market economies, especially China and India, have upset the balance of supply and demand in the oil markets and were partly to blame for rallying oil prices in recent years, he said.