LONDON, 12 April 2005 — World oil prices fell below $53 a barrel yesterday amid easing worries over possible supply shortages, as OPEC looked set to raise output and after Nigerian oil workers dropped a threat to strike.
New York’s main contract, light sweet crude for delivery in May, slid 72 cents to $52.60 a barrel in early deals. In London, the price of Brent North Sea crude oil for delivery in May, lost 84 cents to $52.05 a barrel.
Oil prices had soared to record peaks just a week earlier, reaching $58.28 a barrel in New York and $57.65 in London, on fears of gasoline shortages ahead of the summer driving season in the United States. “OPEC might be pumping a bit more, which may have a softening impact on the market,” Energy Information Centre analyst Veronica Smart said.
The president of the Organization of Petroleum Exporting Countries said yesterday that he believed the organization would go ahead with a proposed output increase of 500,000 barrels per day (bpd) next month despite a drop in prices. “I still believe that the 500,000 (increase proposed by OPEC in Iran on March 16) will be in May because it will be (in) preparation for the third quarter,” Ahmed Fahd Al-Sabah told reporters.
Asked what the cartel would do if prices continued to slide, Ahmed, who is Kuwait’s energy minister, said: “This (anticipated increase) depends on demand and not prices.” “We believe that demand will grow in the third quarter to 28.5 million bpd for the OPEC 10 (excluding Iraq). For that this increase is to meet demand in the market and is not related to prices,” he said. Also weighing on prices yesterday was news over the weekend that oil workers in Nigeria, Africa’s biggest oil producer, had decided not to strike.
Nigeria’s two main oil unions dropped a threat Saturday to paralyze their industry by holding a nationwide strike, saying they had forged a deal on working conditions with employers and the government. The announcement of a “three-day warning strike” was due to have begun yesterday. “The Nigerian strike, which would possibly have cut quite a lot of oil production from the country, has been canceled,” Smart said.
Oil prices began slumping last Wednesday as official inventory data showed crude oil stocks in the United States, the world’s largest petroleum consumer, rose by 2.4 million barrels to 317.1 million in the week to April 1.
The Department of Energy report also revealed that US refineries operated at 93.7 percent of capacity in the week to April 1, up from 91.1 percent the previous week, allaying fears of a gasoline supply shortage ahead of the US summer holiday season beginning next month when many Americans take to the roads.