Strikes affecting French ports and eight of the country's 12
oil refineries cut fuel output and pushed up oil products prices, helping to
limit crude oil's price slide.
Trading was choppy in the oil and equities markets ahead of
the release of minutes from the most recent Federal Reserve policy meeting.
OPEC slightly revised up its oil demand growth forecast for
this year and next, noting Tuesday that China's "overheated" economy
remains a key driver for energy use in a world still struggling to emerge from
its worst recession in decades.
The Organization of the Petroleum Exporting Countries —
supplier of about 35 percent of the world's oil — said the world economy
continues to expand at below-average levels.
"Despite some turbulence and setbacks, the global
economic recovery continues to provide support for oil consumption,» OPEC said
in its October oil market report.
But it stressed that oil demand growth next year will be
"highly sensitive to China's energy policies," even as US demand
remains the "wild card." "Should China emphasize its energy
consumption policy, then this move will negatively affect world energy
usage." OPEC projected oil demand would hit 85.59 million barrels and
86.64 million barrels per day in 2010 and 2011, respectively. In both years,
those figures represented an 80,000 barrel per day upward revision in demand.
Saudi Arabian Minister of Petroleum and Mineral Resources
Ali Al-Naimi said he was happy
with the oil market as he arrived in Vienna on Monday for
Thursday's meeting of the OPEC, the first in seven months.
He described crude prices between $70 and $80 as
"ideal."
On Tuesday, a senior Gulf OPEC delegate told Reuters that
oil prices slightly above $80 a barrel were not a threat to the world economy,
although he declined to say at what point the
oil price could affect recovery.
OPEC has had the same official production ceiling since
December 2008, but compliance with production targets has slipped to 56.5
percent, according to Reuters calculations.
The group said in its monthly report there was a broad
consensus that oil prices around their current range have helped support
economic recovery and promote industry
investment.
US crude for November delivery fell 49 cents, or 0.6
percent, to $81.72 per barrel by 12:31 a.m. EDT (1631 GMT), having traded from
$80.88 to $82.33. In London, ICE Brent November crude fell 32 cents, or 0.38
percent, to $83.40 a barrel.
The US dollar seesawed near flat against the euro after
strengthening earlier on a short-covering bounce as investors awaited the Fed
minutes for clues on the central bank's stance
toward purchasing more assets to stimulate the economy. The
dollar index strengthened.
"The stronger dollar is weighing on crude prices,"
said Stephen Schork, president at the Schork Group in Villanova, Pennsylvania.
A stronger dollar renders dollar-denominated commodities
more expensive for buyers using other currencies and strengthens the value of
greenbacks paid producers.
The minutes of the Fed's meeting on Sept. 21 will be
examined for indications on the likely extent of a second round of quantitative
easing, commonly referred to as QE2, although many analysts said the oil market
had already priced this in.
"We believe the actual onset of QE2 will further lift
oil prices," Michael Lo from Nomura Global Equity Research said in a note.
"However, given the different starting points for oil
prices and economics between QE1 and QE2, we believe the
impact of QE2 will be less pronounced."
