UIT:Oil falls on OPEC hike possibility, demand concern
Oil fell on Monday in thin and choppy trading on raised expectations OPEC will raise production targets this week and concerns about the economic outlook.
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REUTERS
The logo of the Organization of the Petroleum Exporting Countries (OPEC) is pictured on the wall of the new OPEC headquarters in Vienna March 16, 2010.
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Worried that oil prices near $115 a barrel are hitting economic growth, Gulf producers including Saudi Arabia favor an increase in output when the Organization of the Petroleum Exporting Countries meets on Wednesday.
OPEC delegates gathering in Vienna said a deal to do more than close the gap between the official output target and actual production -- about 1.4 million barrels per day -- could prove difficult due to opposition from price hawks such as Iran and Venezuela.
Oil prices leading up to the OPEC meeting have been fairly rangebound, with Brent crude trading between $114 to $117 a barrel over most of the past two weeks.
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Brent crude for July delivery fell $1.36 to settle at $114.48 a barrel, the weakest close in nearly two weeks, in light trading that saw volumes about 25 percent below the 30-day moving average.
U.S. July crude fell $1.21 to settle at $99.01 a barrel, the lowest close in two weeks, with trade volumes about 30 percent below the 30-day moving average.
DOLLAR, STORMS
The dollar recovered against the euro and the dollar index .DXY also turned slightly higher, after early weakness had supported dollar-denominated oil prices. U.S. stocks ended lower and the S&P 500 slumped to its lowest level since March on signs of a slowing economy.
"Today's lower (oil prices are) largely related to the usual bearish combo of stronger dollar and a soft stock market," Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois, said in a note.
"Some positioning ahead of the upcoming OPEC meeting also likely prompted some selling as some key oil ministers appear to be sending out overtures of an increase in production quotas," said Ritterbusch.
Additional pressure on prices came on news TransCanada Corp's (TRP.TO) restarted its 591,000 barrel-per-day (bpd) Keystone crude oil pipeline on Sunday.
The market was also watching a low pressure system in the northwestern Caribbean Sea, which the National Hurricane Center said had a 50-percent possibility of becoming a tropical cyclone developing over the next 48 hours.
A few computer models forecast the Caribbean system to move northwest over western Cuba and reach the U.S. Gulf of Mexico, potentially threatening offshore oil and natural gas production, over the next few days. Other models forecast it to move northeast toward eastern Cuba and the Atlantic.
Ahead of closely watched weekly U.S. inventory reports from industry and government, U.S. crude oil inventories were estimated to have fallen slightly last week, a Reuters poll of analysts on Monday showed. Gasoline and distillate stockpiles were expected to be higher.
POTENTIAL SUPPLY THREATS
Traders also eyed ongoing turmoil in Yemen and Syria. The United States called on Yemen to move toward democracy while President Ali Abdullah Saleh recovers from shrapnel wounds in Saudi Arabia. Yemen's acting leader insisted Saleh would return in days.
Syria's government said it will respond firmly to armed attacks after state television said gunmen killed more than 80 security members in a northwestern town.
The Nigerian army said it was investigating a purported threat by the Niger Delta's main militant group to attack oil industry facilities in the OPEC nation.
