Oil prices fall

Oil prices slid lower today amid hopes that Opec would act to increase output at an emergency meeting scheduled for this weekend – raising hopes that petrol prices would not surge ahead.

By mid-afternoon in London the oil price was down 98 US cents (94c) at $28.35 (€27.16) a barrel.

Analysts said the fall was partly on the back of the Organisation of Petroleum Exporting Countries (Opec) calling a meeting in Vienna on Sunday to discuss the current market situation, which has seen oil prices shoot up.

The cartel has a target range of between $22 and $28 (€21 and €26.70) a barrel, which it maintains by increasing or decreasing output.

But oil prices have shot up of late because of a strike in oil-rich Venezuela and mounting speculation over the possibility of war with Iraq. Prices have risen to above $31 (€29.7) a barrel in London.

However, speculation that Opec would move to increase output in order to lower the price has seen prices slip back.

In addition, a sharp fall today came after US inventory figures were released showing larger-than-expected US oil reserves.

Energy minister Brian Wilson said the expected move by Opec meant there should be no rush to raise petrol prices.

“This reinforces my view that there should be no rush to increase pump prices for the motorist and that it will be possible for the industry to take a more balanced judgment following Opec’s response,” he said.

He added: “I have previously welcomed Opec’s move towards accepting that sharp fluctuations in oil prices are in nobody’s longer-term interest. This is true for British motorists and also for less developed economies which depend on oil imports.

“There have been some alarmist stories about the probability of large increases in the pump price of petrol. There is, however, no justification in current circumstances for any such trend.”

However, the sharp price fall today meant analysts questioned whether Opec would actually act this weekend to increase production.

Orrin Middleton, oil analyst at Barclays Capital, said: “We are around $2.5 (€2.39) down since Opec thought about getting round a table to talk – so now when they get there, will they go through with it?

“On Monday I would have said they will increase – now there may be not be a rise.”