Oil prices ease
Oil prices fell 3% today after Opec agreed to make an extra two million barrels a day available and the threat to US refineries from a new hurricane diminished.
Traders reacted positively to the move by Opec because it calmed fears of a shortage of winter fuel supplies, with the cost of US light crude falling as low as 65.10 US dollars a barrel before recovering slightly.
Nerves were settled further by news that a storm gaining strength off the US coast had changed course slightly and was expected to avoid major oil refineries near Houston, Texas.
Although tropical storm Rita had strengthened into a hurricane, its projected path was also wide of the smaller refining centre at Corpus Christi – home to about 3.4% of US capacity.
On the International Petroleum Exchange in London, the price of a barrel of Brent crude for November delivery was down by 1.86 US dollars at 63.75 US dollars a barrel.
It comes 24 hours after the market experienced panic buying as traders drew parallels between Rita and Hurricane Katrina, which wreaked havoc in the Gulf of Mexico last month.
Oil prices spiked more than four US dollars a barrel on Monday, but remained below the 70.85 US dollars seen when Hurricane Katrina blazed through the Gulf of Mexico.
The softer market today means that petrol retailers in the UK are under less pressure to reverse the cuts in pump prices made during the past week.
Opec agreed to make all of its remaining crude oil capacity at a meeting of the cartel in the Austrian capital of Vienna.
Analysts said the move was largely symbolic because there was evidence that refineries lack the ability to use the heavy, sour crude on offer.
Kevin Norrish, of Barclays Capital, said: “We see the real significance of Opec’s decision as the first step in creating a framework for Saudi Arabia to raise output levels independently of overall Opec quota limits.”
This would enable the cartel to be more flexible when deciding whether to increase oil production in future, he said.
