Oil slips below $59 on OPEC doubt, high stocks
Sun Nov 5, 2006 4:13pm ET
By Neil Chatterjee
SINGAPORE, Nov 6 (Reuters) - Oil slipped under $59 on Monday as traders doubted OPEC's resolve for production cuts despite assurances from the cartel's president.
A lack of attacks on the oil industry in Nigeria over the weekend also eased concern over further disruption to the world's eighth-largest exporter, following a U.S. warning last week for an imminent militant bombing campaign.
U.S. light crude for December delivery <CLc1> was down 21 cents at $58.93 a barrel by 0200 GMT, after gains of $1.26 on Friday that trimmed losses last week to 2.7 percent. London Brent crude <LCOc1> traded 21 cents down at $58.94 a barrel.
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OPEC President Edmund Daukoru said on Sunday all OPEC members will fully implement their oil production cuts, while market conditions may force the cartel to cut output further next month, indicating the group may no longer tolerate prices under $60.
"A December quota cut may be necessary because the market is still soft," Daukoru told Reuters in South Korea ahead of an oil conference. "$60 will not hurt the world economy."
Price hawk Venezuela is recommending OPEC take an additional 300,000 barrels per day (bpd) off the market at its December meeting, to add to a 1.2 million bpd cut agreed from November, to try to stem a 25-percent price slide since mid-July.
Despite the assurance, market scepticism over the cuts was underlined by a Reuters survey that showed OPEC oil output rose 70,000 bpd in October as a jump in supply from Nigeria outpaced cutbacks from Saudi Arabia, Iran and Iraq.
Worries over Nigerian production sparked a rally on Friday, after the U.S. consulate in Lagos warned a militant group in the country's oil producing Niger Delta may have imminent plans to launch a campaign of bombings and attacks on oil facilities.
"Nigeria has an even greater importance because of the lighter, but scarcer, grades of crude they produce -- a major interruption to Nigerian supply would push prices higher," said Tobin Gorey at the Commonwealth Bank of Australia.
Violence in the world's eighth-largest exporter has already cut oil output by 500,000 barrels a day since February.
Production in Iraq, where a court on Sunday sentenced former leader Saddam Hussein to hang, fell around 140,000 bpd in October from September as there no shipments from a sabotage-hit northern pipeline to Turkey.
Despite the OPEC cutbacks and ongoing geopolitical worries in producer nations, bulging fuel stocks in top consumer the United States and concerns over the U.S. economy have depressed the market into a month-long trading range of $57-$62 a barrel.
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(Editing by Ben Tan; +65 6870-3836))
Keywords: MARKETS OIL
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