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Oil markets focus on Opec meeting Oil prices slide on Iran report
(about 9 hours later)
Oil prices are little changed ahead of Wednesday's summit of the oil producers' cartel, Opec in Abu Dhabi. Oil has fallen below $88 a barrel, losing ground after a US report downplaying Iran's nuclear ambitions had eased geopolitical concerns.
Delegates have been tight-lipped about whether there will be an increase in oil production to bring down prices. US light sweet crude fell $1.71 to $87.60 a barrel in New York, while a barrel of Brent crude dropped 63 cents, to $89.17 in London.
But speculation remains that there could be an increase in production of 500,000 barrels per day. Tension between the US and Iran has contributed to the rally in oil prices.
US Light sweet crude fell 55 cents, or 0.6%, to $88.76 a barrel in New York, while a barrel of Brent crude dropped 30 cents, or 0.3%, to $88.95 in London. Traders also reacted to mixed signals on whether Opec would increase oil production at a Wednesday meeting.
Oil prices have dropped by about $10 in the past week on the widespread belief that there will be an increase in Opec production. The US report by the National Intelligence Estimate said Iran had halted its nuclear weapons programme in 2003, contradicting the US administration's previous view.
This is despite the fact that the official line from Opec remains that oil supplies are adequate to meet demand and that high prices are the fault of speculators. Pressure
But ironically, analysts said, the falling price may persuade Opec delegates that the increase in output is now unnecessary. "The chances of a unilateral or pre-emptive strike on Iran decreases with the NIE's announcement and make it much more difficult for the Bush administration to go down that path, so I think it is near-term bearish for prices," said Eric Wittenauer, an analyst at AG Edwards.
The price has also been depressed by a US intelligence report saying Iran halted its nuclear weapons programme four years ago, easing tensions. President George W Bush said the international community should continue to pressure Iran on its nuclear programmes and said Tehran remained dangerous despite the new intelligence report.
"The fear of a unilateral strike on Iran has been an important component of the risk premium in crude oil," said Olivier Jakob from Petromatrix in Switzerland. Oil prices have fallen in recent days on speculation that the Organisation of Petroleum Exporting Countries will increase oil production by 500,000 barrels per day to bring down prices.
Prices rose and fell throughout the trading day as differing statements were reported from delegates of Opec members arriving in Abu Dhabi for the Wednesday meeting.
Officials from Qatar, Venezuela, Iran and Libya have spoken against the need to pump more oil, while ministers from Indonesia, Nigeria and Kuwait said they were still open to increases.