Oil prices fall by almost US$2

17-Sep-05

As OPEC assured an increase in output once again, oil prices fell to US$63. This is a drop of almost US$2, as OPEC gears up to pump more crude into a market that is showing signs of global slow down. Adding to market relief was news released by the United States that Hurricane Katrina has not caused major damage to underwater pipelines in the Gulf of Mexico oil and gas producing region. US light crude fell to US$63.00 a barrel. London Brent crude fell by US$1.85 to US$61.81. OPEC is currently pumping at its highest rate in over two decades, and is expected to increase output when it meets next week. Will an increase in crude supplies ease prices inflated by a shortage of refined fuels? Many analysts are of the opinion that crude stocks are abundant and refiners have no need of extra supplies. This is evident in the fact that the US government has sold only 11 million barrels of emergency reserves- barely one third of the total it had offered. Fueled by booming demand from USA (the world's biggest consumer) and the booming economies of China and India, crude oil prices have doubled in a 2 year rally. US prices have fallen sharply from a record high US$70.85 on August 30, a day after Hurricane Katrina hit the U.S. Gulf Coast. At current levels, prices remain below only the highest levels seen in 1980, the year the Iran-Iraq war began. Industry and economies are finally feeling the strain of high prices as forecasts for oil demand growth in the major economies have been trimmed.