Price of crude oil falls as impact of cuts is delayed
OPEC, which pumps about a third of the world’s oil, pledged last week to reduce oil output to bolster prices. It takes about 40 days for oil from the Persian Gulf to arrive in the US, delaying the impact of the cuts. US oil imports soared 13% to a record 10.6 million barrels a day in the week ended April 18, the Energy Department said last week.
“Imports should remain relatively high or at record levels into June,” said Marshall Steeves, an analyst with Refco Group Ltd in New York.
It will be the third quarter before the cuts have any effect on the US. Crude oil for June delivery was down 61 cents, or 2.3%, at $25.65 a barrel as of 10.28am on the New York Mercantile Exchange.
The contract closest to expiration has declined 16% in the last five sessions and is down by a third from a 12-year high of $39.99 reached on February 27.
In London, the June Brent crude-oil futures contract was down 41 cents, or 1.7%, at $23.68 a barrel on the International Petroleum Exchange.
Iranian Oil Minister Bijan Namdar Zanganeh said April 25 that, excluding Iraq, OPEC’s production in May will be close to the March level of 26 million barrels a day.
At a meeting last week, OPEC decided to raise its daily production quota by 900,000 barrels to 25.4 million barrels beginning June 1. At the same time, oil ministers said they would reduce actual production, which the producer group estimated at 27.4 million barrels a day.
The ten OPEC members with quotas, all except Iraq, produced 26.07 million barrels a day in March, according to Bloomberg estimates, 670,000 barrels a day higher than the new quota.
Iraqi oil sales through a United Nations export programme stopped on March 20 because of the US-led invasion. While production is being restored for domestic use, there is no legal framework for oil export sales to resume.
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