Oil prices falling as supply outstrips demand

Oil prices fell by more than one US dollar a barrel today as OPEC’s president said supplies were growing faster than demand.

“There’s no news to keep prices from falling,” said Ed Silliere, vice president of risk management at Energy Merchant in New York, noting that the market has even shrugged off recent pipeline sabotage in Iraq.

Light crude for October delivery dropped 1.09 US dollars to 42.90 per barrel on the New York Mercantile Exchange in morning trading. Last month prices were heading toward 50 dollars a barrel.

With only a thin margin of spare output capacity worldwide, energy markets have been jittery all summer due to the possibility of output disruptions in Iraq, Russia and Venezuela.

But with the exception of sporadic export troubles out of Iraq, the global supply chain has remained intact.

Speaking at the World Energy Congress in Sydney today, the president of the Organisation of Petroleum Exporting Countries said world oil production is running “1.5 million barrels every day above demand, based on our forecasts".

Purnomo Yusgiantoro said oil production in the 11 OPEC nations, including Iraq, is 29 million to 30 million barrels a day. OPEC oil ministers are set to meet in Vienna later this month to discuss ways to bring prices down.