Oil prices slump under $90 as traders eye Opec meeting

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LONDON: The price of oil fell back below $90 on Friday as the market speculated about the chances of an increase in Opec output at the cartel s meeting next week, dealers said.

They said prices also fell after it appeared more likely that an explosion on a key pipeline from Canada into the United States would have only a limited impact on supply.

On Friday, New York s main contract, light sweet crude for January delivery, was down $1.75 to $89.35 per barrel, after earlier striking a one-month low of $88.52.

Brent North Sea crude for January tumbled $1.32 to $88.93.

The Organization of the Petroleum Exporting Countries (Opec) meets in Abu Dhabi Wednesday with many participants expecting the group to boost output to help counter record-breaking prices.

All eyes will be on Opec now ahead of the group s meeting on Dec. 5, said Nimit Khamar, analyst at the Sucden brokerage in London.

Many expect the group to hike supplies in order to cool off prices.

The oil producers group is a key player in the energy market because it produces about 40 percent of the world s crude.

Opec last decided to raise production in September when it agreed to provide an extra 500,000 barrels a day to the market from Nov. 1.

The forthcoming Opec conference now looms large over the oil market, the Commonwealth Bank of Australia (CBA) said in a report to clients.

It appears that oil markets are considering the possibility that there will be an increase in Opec production ceilings of at least 0.5 million barrels per day.

Earlier this week, Saudi Oil Minister Ali Al-Nuaimi said the market was well supplied and that high prices did not properly reflect supply and demand.

Asked whether Saudi Arabia, the world s biggest oil exporter, would push for an increase in production at next Wednesday s meeting, Nuaimi said the cartel would first need to see market data.

Since striking record peaks just under $100 last week, prices have slumped by about $10 in New York and almost $8 in London.

On Monday however, prices staged a fresh assault on $100 on fresh concerns over supplies.

The New York contract jumped as high as $99.11, just short of the record $99.29 struck the previous week.

The market then tumbled owing to feverish speculation that Opec might ramp up output, amid news of a smaller-than-expected drawdown of US energy reserves.

The explosion on the pipeline linking Canada with the United States, which is the biggest energy consumer in the world, then provided another spike.

Enbridge Inc said that an explosion in the northern US state of Minnesota forced the company to shut down four pipelines.

For a while, the market had no idea how long the disruption would be from the explosion … it was certainly thought that it would be weeks and perhaps a month or more, before oil could move through the pipeline south from Canada to the central US, said Dennis Gartman, editor of trading note the Gartman Letter.

However, by late (Thursday), Enbridge had three of the four pipelines affected up an running, with a promise that the fourth would be running in the next several days.

Enbridge s pipeline system serves major refineries in Canada s Ontario province as well as the Great Lakes region of the United States, delivering about 2.2 million barrels per day. -AFP

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