Asian oil slips as producers seen tempted to raise output

The contract ended in New York at $24.22, a fall of 56 cents from the previous day.

Traders said a sell-off had been triggered by a Reuters’ survey which showed that compliance by 10 members of the Organisation of Petroleum Exporting Countries (OPEC) to their production cuts had loosened in December.

The survey showed that output reductions amounted to 3.212 million barrels per day (bpd) in December, compared with 3.492 million bpd in November, and more than a million bpd below the 4.32 million bpd target for cuts agreed last March. It indicated the producers’ compliance slipping to 74 per cent in December, from a revised 81 per cent in November. US crude prices have lost around six per cent from where it ended last year, and were currently more than $3.00 per barrel below the nine-year peak of $27.15 reached in late November.

Sentiment was also dampened by unseasonably mild weather in the United States, and expectations that oil stocks built up late last year on fears of Y2K supply problems, would start to dry up following a smooth New Year transition.

Such stocks were estimated to have reached 17 million barrels in total of crude, distillate fuel and gasoline. But producers have signalled that output cuts, due to expire in March, might be extended beyond the deadline if the market remained as it was now. Venezuelan and Mexican oil ministers said on Friday that no final decision on oil policy would be made until late February, but that both were committed to following any policy which ensured price stability in the second quarter of the year. “If (oil market) conditions remain as they are now, the logical thing would be to extend the (output) agreements,” Venezuela’s energy and mines minister Ali Rodriguez, said after a meeting with his Mexican counterpart Luis Tellez.