Oil prices slide

2011-06-13 09:31

Singapore - Oil prices fell in Asian trade on Monday, depressed by Opec kingpin Saudi Arabia's plan to raise output to Asia despite the cartel's decision to keep oil production steady, analysts said.

New York's main contract, light sweet crude for July delivery, lost 54 cents to $98.75 a barrel, while Brent North Sea crude for delivery in July was down 27c to $118.51 in the afternoon.

"Oil is pulling back and primarily reacting to expectations that Saudi Arabia will raise output and supply more oil to Asia," said Victor Shum, a Singapore-based analyst at Purvin and Gertz international energy consultancy.

The 12-nation Organisation of Petroleum Exporting Countries (Opec) meeting in Vienna last Wednesday failed to agree on raising oil production to aid a faltering global economy stumped by high crude prices.

Riyadh's push to raise production to moderate price increases was rebuffed by Iran and its allies, who successfully lobbied to keep output steady at 24.84 million barrels per day, a level that has stood since January 2009.

The market was debating whether members of Opec - which controls about 40% of global production - would hold to the quota, especially crude giant Saudi Arabia.

"Opec is not in a crisis and the failure of the cartel to reach a decision on quota is not inherently bullish in that Saudi oil will almost certainly still be forthcoming," said Robert Johnston of the Eurasia group.

"Saudi Arabia is already signalling in the aftermath of the Vienna meeting that it will continue on that track with increases, provided that a still-weak US demand picture starts to improve."

Opec also said in Friday's report that it expected global oil demand to increase by 1.6% to 88.14 million barrels per day in 2011, slightly lower than its previous forecast.

However, it added, "A volatile oil market is making future oil demand estimates hard to manage."