London: Brent crude fell slightly on Wednesday, on uncertainty about whether a credible deal to resolve the region’s debt crisis will be reached at a keenly awaited summit on Friday.
Tentative optimism in early trade was tempered after a German government official said Berlin was increasingly pessimistic about the chances of a deal to solve the crisis at the summit, because some governments don’t seem to grasp the gravity of the situation.
Brent crude fell 20 cents to $110.61 by 05:30 am. US light crude was 10 cents lower at $101.18.
“The oil market is easily disappointed, people are a bit wary,” said Seth Kleinman, analyst at Citi.
Announcements of increased supply from Saudi Arabia also helped to keep pressure on prices.
EU officials are reported to be working on a last-minute proposal to raise the combined lending limit of the EFSF rescue fund and the permanent structure that will replace it, the ESM.
The latter fund was due to be launched in 2013 but efforts are said to underway to bring that forward by a year.
“The market is in expectation mode, and we have yet another make or break summit, with people thinking that they wouldn’t dare walk away without something,” said David Morrison, market strategist at GFT Global.
But he said that there was scope for a retreat in all risky assets after the summit.
“The great danger is that people look at what’s said and see there’s nothing concrete, sensible or useful so we are setting ourselves up for a disappointment.”
Oil traders were looking closely at the latest pronouncements from Opec members ahead of a meeting of the cartel of oil exporting nations next week.
Saudi Arabia produced 10.047 million barrels per day of crude oil excluding condensate in November, a senior Saudi oil official told Reuters on Wednesday.
The top oil exporter produced 10 million barrels per day of oil in November, Bloomberg reported earlier, citing oil minister Ali al-Naimi.
The country produced 9.45 million barrels per day (bpd) of crude in November versus 9.40 million bpd in October, according to a Reuters survey.
Rising oil production from Saudi Arabia is seen as reassuring investors who are worried that Iranian supply into Europe may be disrupted by sanctions from the European Union.
However Opec’s secretary general Abdullah al-Badri said Iranian oil supplies to Europe would be difficult to replace if a ban supported by some European states were imposed.
Opec is due to meet on 14 December in Vienna to set output targets for early 2012.
Group members, at odds over supply policy since June, looked set to agree on a new production target that legitimizes current cartel output at around 30 million barrels a day.
The International Energy Agency’s executive director, Maria van der Hoeven, said on Wednesday recent oil output levels by Opec producers are appropriate for the oil market throughout 2012.
A sharper-than-expected fall in US crude stocks announced on Tuesday failed to significantly boost oil prices, as the bullish data was offset by larger-than-projected builds in gasoline and distillate inventories, industry data showed on Tuesday.