Oil slips on call for higher quotas
Oil prices dived yesterday as calls for an increase in quotas by members of the Organisation for Petroleum Exporting Countries grew louder, and data from the United States reported a surprise build-up in inventories.
North Sea Brent blend crude oil for January delivery fell 33 cents to US$18.76 a barrel, before recovering slightly to $18.85, and brokers began targeting $18.50 as a potential floor for the day.
The decline in the price of oil came as the United Arab Emirates (UAE) added its support to suggestions made by Saudi Arabia that quotas should rise from 25 million barrels per day (bpd) to 27.5 million bpd.
Such an increase would only bring oil to its real level of Opec production, analysts said.
'The market is in supply mode paranoia. One minute it is under supplied, the next minute it is oversupplied,' Charles Gray, an oil analyst at Prudential Bache, said.
Some Opec members believe demand would grow next year, justifying a rise in quotas, but it was thought that no one but the UAE, Saudi Arabia and Kuwait had any additional production capacity.
There was also concern yesterday over unexpected data produced by the American Petroleum Institute, which showed a startling 3.56 million barrel increase in crude stocks along with a 3 per cent jump in refinery run rates to 95.1 per cent.
Brokers said investors were also keeping an eye on ongoing discussions at the United Nations over the Iraq food-for-oil programme, which is due to expire on December 5.
