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Oil falls on talk of Opec increase
By Javier Blas in London
Published: November 27 2007 15:22 | Last updated: November 27 2007 22:49
Prices of commodities moved lower on Tuesday, with crude oil sharply down on expectations that Opec would agree to increase production at its ministerial meeting in Abu Dhabi on Wednesday.
Crude oil prices plunged more than $3 a barrel.
EDITORS CHOICE
Opec to discuss rise in output - Nov-27The Short View: Commodity prices - Nov-26Gazprom warns of record gas prices ahead - Nov-27European View: Kazakhstan plays deft hand in global oil game - Nov-26Where next for commodities after price blip? - Nov-23Apart from the hope of a production increase from the cartel, prices also came under pressure after Goldman Sachs downgraded its forecast for the US economy. Any US slowdown could lead to weaker demand for oil.
However, crude oil prices were still trading within the range of $90-$100 a barrel that has prevailed for most of the past five weeks.
Nymex January West Texas Intermediate fell $3.28 to settle at $94.42 a barrel ICE January Brent fell $2.80 to close at $92.52 a barrel.
WTI crude oil prices had hit a nominal all-time high of $99.29 a barrel last week.
The oil producers cartel, which controls more than 40 per cent of the worlds crude oil supply, will consider a further supply boost on top of the 500,000 barrels a day it approved in September, according to several Opec officials.
An industry official familiar with Opec policy said that several Gulf countries, including Saudi Arabia, were pushing for a production increase.
They are going for an increase in Abu Dhabi, the industry official said, noting that ministers were discussing a rise of at least 500,000b/d and as high as 1mb/d.
The official warned that Venezuela and other countries opposed the move. Another official confirmed the discussion and the production volumes.
Saudi Arabia, the groups most influential member, has not disclosed its position yet, only noting that it was currently pumping about 9mb/d, in line with Opecs September agreement.
The fall in oil prices and a firm US dollar helped to push gold prices lower. Spot gold in London fell to $807.9 an ounce from Mondays high of $836.7 an ounce.
Base metals reversed previous gains and fell across the board, with the only exceptions being aluminium and tin, amid concern over the health of the US economy. Goldman Sachs also downgraded the base metal sector in the US to neutral from attractive, citing increased downside risk on base metal prices over the next six months because of uncertainty over the global macroeconomic outlook. On the London Metal Exchange, copper fell 1.8 per cent to $6,590 a tonne while aluminium rose 0.1 per cent to $2,506 a tonne. Zinc lost 1 per cent to $2,375 a tonne and lead fell 1.5 per cent to $2,980 a tonne. Tin, meanwhile, rose 0.8 per cent to $16,825 a tonne, approaching its mid-November record high of $17,550 a tonne. Nickel lost 1.4 per cent to $28,700 a tonne.
On the agriculture market, soyabean fell from its 34-year high record on profit taking, while wheat moved higher. CBOT January Soyabean fell 19¼ cents to $10.84½ a bushel. Soyabean hit $11.14¼ on Monday, its highest level since July 1973.
CBOT December wheat rose 6¼ cents to $8.20 a bushel, while the more active January contract rose to $8.41 a bushel. CBOT December corn was flat on the day at $3.85 a bushel, while the more active January corn contract rose to $4.43 a bushel.
The Baltic Dry Index, a gauge of shipping cost, fell below the 10,000 level for the first time since early October on fears of an economic slowdown and already record high freight cost. The index dropped 1.1 per cent to 9,897 points.