OPEC meets as oil falls further

CRUDE oil fell for the first time in four days on forecasts that US inventories rose and scepticism OPEC will cut production by one million barrels a day.

US crude oil supplies probably climbed 1.5 million barrels last week, according to the median of forecasts by 14 analysts before a US Energy Department report tomorrow. The Organisation of Petroleum Exporting Countries, which pumps about 40% of the world’s oil, will meet in Qatar in two days to confirm the informal agreement to reduce output.

“We are shrugging off OPEC’s production cuts,” said Kyle Cooper, director of research at IAF Advisors in Houston. “There are healthy inventories and any cut in production will increase spare capacity, which undermines the bullish case.”

Crude oil for November delivery fell $1.01, or 1.7%, to close at $58.93 a barrel on the New York Mercantile Exchange. Futures touched $60.54, the highest since October 10. Prices are down 8.4% from a year ago.

OPEC members will gather tomorrow in Doha, Qatar, to ratify the agreement, Kuwait’s oil minister, Sheikh Ali-Jarrah al-Sabah, said. Ministers are concerned that prices may plunge after declining 22% in the past three months as US fuel stockpiles increased.

“We will be waiting to see what OPEC actually does; they may surprise us and come through with a credible cut in output,” said Bill O’Grady, director of fundamental futures research at AG Edwards & Sons Inc in St Louis.

Mohammed Barkindo, the acting secretary general of OPEC, said this week the group would discuss whether to cut actual production or to lower its output quota.

OPEC agreed at a meeting on September 11 to leave its output ceiling unchanged at 28 million barrels a day. The quota doesn’t apply to Iraq, which produced 2 million barrels a day last month. The group produced 29.64 million barrels a day in September, down from 29.8 million barrels a day in August, according to estimates.

Signs of a slowing US economy are also weighing on prices. Prices paid to US producers fell last month by the most in more than three years and industrial production dropped, according to government reports released today. The US consumes 25% of the world’s oil.

The European Union said its diplomacy is failing to curb Iran’s nuclear program and the United Nations should act on US-led demands for sanctions against the country. Iran has the world’s second-biggest proved oil reserves and borders the Strait of Hormuz, a narrow waterway through which almost a quarter of the world’s oil is shipped.

EU foreign ministers said the door is open for the UN Security Council to discuss sanctions against Iran for refusing to stop uranium enrichment, a process that can be used for nuclear power or bombs.

Crude oil in October 6 were 14% above the five-year average for the period.

Petroleum, heating oil and diesel stockpiles were also above the five-year average.