Crude oil fell as Saudi Arabia, OPEC's biggest producer, said it will increase production capacity.
Saudi Arabia has 3 million daily barrels of spare capacity and will push ahead with projects to expand output, Oil Minister Ali al-Naimi said today. Prices plunged yesterday after al-Naimi said he saw no need for an emergency OPEC meeting to consider further cuts in output. Prices have plunged 17% this year on speculation OPEC members won't comply with production cuts. „The Saudis are saying that they don't want to be the swing producer,” said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons Inc. in St. Louis. „The Saudis have made substantial cuts, unlike a lot of the other OPEC members. Oil in a $40 to $50 range suits the Saudis much better than oil at $70.” Crude oil for February delivery fell 13 cents, or 0.3%, to $51.08 a barrel at 10:01 a.m. on the New York Mercantile Exchange.
Futures touched $50.28, the lowest since May 25, 2005. Prices are down 24% from a year ago. Oil in New York has fallen 28% in the past year when measured in euros, 31% in British pounds and 20% in yen. „The Saudis probably want lower prices for a combination of reasons,” said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. „This could benefit them both politically and economically. This may be a signal for Iran to stop meddling in Iraq and at the same time stanch the move to alternative fuels such as ethanol.”
The Organization of Petroleum Exporting Countries, which pumps about 40% of the world's oil, agreed to cut production by 1.2 million barrels a day starting November 1, citing slower-than-forecast demand growth and rising stockpiles. Member states will cut output by a further 500,000 barrels on February 1, the group said December 14. Brent crude oil for March settlement declined 6 cents to $51.56 a barrel on the London-based ICE Futures exchange. (Bloomberg)