Oil prices found their feet just below $25 here on Thursday morning after falling prey to a bout of profit-taking in response to the widely expected OPEC output cut of 1.5 million barrels per day.
Reference Brent North Sea crude for March delivery sold for $24.79 dollars a barrel, having closed at $24.90 a barrel on Wednesday. In New York, light sweet crude for delivery in February fell back 69 cents to $29.60 a barrel overnight.
Prices fell on Wednesday after the Organisation of Petroleum Exporting Countries (OPEC) agreed to slow its pumps by 1.5 million barrels a day from the beginning of February to bolster prices.
OPEC will meet again on March 16 to consider further reductions in output quotas, the group said at the close of its meeting in Vienna.
Prices receded in the wake of the announcement as traders cashed in gains clocked up ahead of the widely-expected cut, analysts said. "It was quite simply a 'sell (on) the fact reaction' and there was little that surprised anyone from the meeting," GNI analyst Lawrence Eagles said.
"In reality, the cut in production is probably what OPEC needs to do at this point in time to prevent a serious collapse in the oil price later in the year," he said.
The Paris-based International Energy Agency said on Thursday that the OPEC decision to slash output by more than five percent would have a "moderate" impact on the markets. But it said that it remained concerned that the move could increase market volatilty.
"These types of unilateral measures to stabilise price on the oil market only increase their volatility," said Robert Priddle, the IEA's executive director. Traditionally, the second quarter of the calendar year allows importing countries to rebuild their stocks, he said.
But the OPEC cut "will make it all the more difficult to reconstitute stocks ... and low stock levels contribute to the volatility of the market, which is neither in the interest of producers nor consumers," Priddle said.
The latest snapshot of US crude stocks from the American Petroleum Institute (API) on Wednesday showed an increase of two million barrels last week. But oil-consuming countries fear that the OPEC cut will hinder the recovery of fragile stocks.
US Energy Secretary Bill Richardson, whose efforts to broker a smaller cut with OPEC member states fell on deaf ears, said that the OPEC cut had the potential to "contribute to volatility in the market."
"As both the United States and the European Union expressed, we remain concerned that any cut in production has the potential to lower stock levels and contribute to volatility in the market," he said in a statement issued in Washington on Wednesday.—AFP.
©--Agence France Presse.
© 2001 Mena Report (www.menareport.com)
