Oil price volatile ahead of Opec meeting
Oil price volatile ahead of Opec meeting
Tuesday 9th September 2008
Crude oil prices have been volatile ahead of an Opec meeting and the impending arrival of Hurricane Ike in the Gulf of Mexico.Fears the hurricane would disrupt oil operations in the area pushed the price of New York's main contract, light sweet crude for delivery in October, up 11 cents to close at $106.34 a barrel.
However, analysts believe oil cartel Opec, which is meeting today, will decide to keep oil output steady, rather than make any cuts.
The expectation led to falls in the price of Brent North Sea crude for October in London, down 65 cents to reach $103.44 per barrel.
Paul Harris, head of natural resources risk management for Bank of Ireland, said: "The likelihood is that, despite a concerted efforts from Iran and Venezuela, output will be held at current levels.
"However, given that the cartel is currently producing above the 29.67million barrels per day (bpd) limit it is probable that the excess will be eliminated on an informal basis."
Opec keeps global oil prices steady by setting an output level that member countries abide by. However, some have been producing greater volumes than agreed, particularly Saudi Arabia.
If this excess – around a million barrels – is informally cut, as Iran is lobbying for, output will effectively drop and therefore the price of oil will rise.
In recent weeks, the price of oil has been heading back to $100 a barrel, after a July high of $147 a barrel.
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