Opec rumours send prices tumbling

28 November 2007

Continuing speculation about the production plans of the Organisation of Petroleum Exporting Countries (Opec) saw the price of crude oil drop below $94 (£45.60) a barrel on Wednesday morning.

US crude climbed above $99 a barrel a week ago because of fears about supplies and the weakness of the dollar against other major currencies.

However, the news that the Iranian and Saudi oil ministers are both open to the idea of increasing output if economic data supports the move helped to ease supply fears and brought downward pressure on prices.

As a result, US crude lost $3.28 on Tuesday and a further 55 cents in Wednesday's Asian trading to reach $93.87 a barrel.

Similarly, London Brent crude slipped $2.80 to close at $92.52 on Tuesday, before sliding by another 36 cents on Wednesday morning.

Paul Harris, head of natural resources risk management at the Bank of Ireland, warned that there is no guarantee the downward trend would continue, even if the Opec nations agree to the rumoured 750,000 barrels a day increase in output at their meeting next week.

He explained: "Even if the reports … have any credence, the fact remains that the output will still remain some 250,000 barrels per day less than this time last year, not taking into account the demand increases seen this year."