The price of oil fell on Tuesday as investors digested a promise by OPEC that it would boost oil production by 500,000 barrels a day, and UN approval of Iraq's request to be paid in euros for its oil.
Benchmark Brent crude oil for December delivery was selling for 30.88 dollars a barrel from 31.14 dollars at the close on Monday.
Confirmation by United Nations diplomats Monday that they had no objection to Iraq's request to be paid in euros rather than dollars for its oil eased market concerns that Baghdad might impose an oil embargo over the issue.
The market was also digesting the commitment on Monday by the Organization of Petroleum Exporting Countries (OPEC) to pump 500,000 barrels a day of extra crude from Tuesday, which produced no marked swings in prices.
Market players had largely anticipated the decision because it was made under OPEC's stabilization mechanism under which it had promised to increase output if prices exceeded the OPEC basket price for more than 20 trading days.
Furthermore, much of the increase would be absorbed by current overproduction, analysts believe.
An unexpected supply-side announcement came from non-OPEC member Mexico, which announced late on Monday that it would increase its oil exports by 300,000 barrels a day in 2001 in a bid to rein in prices that have soared to 10-year highs above 35 dollars a barrel in recent weeks.
Supply shortages should ease in coming months, as refineries, which had been running below full capacity, were heading towards full steam, the GNI brokerage said Tuesday.
As refineries approach their full capacities, oil product availability should increase, but so should demand for crude, GNI said in a research note.
"It is, though, a 'chicken and egg' situation to analyze, but we suspect that product weakness will ultimately result in lower crude prices as well over the coming weeks," GNI said -- LONDON (AFP)
© 2000 Al Bawaba (www.albawaba.com)
