Oil prices eased further today as the head of the OPEC cartel said markets were well-supplied with crude and traders continued to take profits from this year's 40 per cent
rally.
London Brent crude fell 20 cents to $40.42 a barrel, following a 61-cent drop yesterday. US light crude fell 91 cents to $43.08 a barrel, catching up after being closed yesterday for the long Labor Day weekend.
Brent prices now stand nearly $5 below the $45.15 record high hit last month, as higher production from the Organisation of the Petroleum Exporting Countries is helping to ease concern about tight world supplies.
OPEC President Purnomo Yusgiantoro said in Sydney that global markets had an oversupply of about 1.5 million barrels per day (bpd) of crude oil. Cartel ministers meet on September 15th to set supply policy for the fourth quarter.
UAE Oil Minister Obaid al-Nasseri, echoed that sentiment when he said that OPEC would discuss raising its official production limits when it meets next week in Vienna, but had already done all it could to cool oil prices by pumping nearly flat out.
He added that formal suspension of output quotas was "not an option".
Top world oil exporter Saudi Arabia is estimated to have pumped 9.5 million bpd in August, up 250,000 bpd from July.
The kingdom, which has pledged to supply customers with all the oil they want to stem this year's price rally, cut prices for westbound October-loading crude in an effort to entice buyers to take the shipments.
Many analysts do not expect prices to fall far, as rapid world demand growth and tight spare production capacity magnify the impact of supply disruptions in Iraq.
Oil shipments along Iraq's northern pipeline to the Turkish port Ceyhan remained shut due to a sabotage attack last week. Repairs were expected to take at least a week.
A threat to US oil production in the Gulf of Mexico faded after Hurricane Frances fizzled out and Royal Dutch/Shell restored shut-in production.
Demand for gasoline in top world consumer the United States is now passing its summer peak, and traders are switching their focus to consumption of heating fuels, which rises to a seasonal high during the northern hemisphere winter.
European supplies of gas oil threaten to tighten as the region's refineries go into extensive maintenance to prepare for new environmental rules on diesel fuel, and German households stock up ahead of winter.
European forward stock cover, taking account of increased demand, is the lowest in 10 years according to SG bank.