Crude oil fell as Saudi Arabia's state oil company told its customers in Asia and the Mediterranean to expect the same quantity of oil in November as last month, undercutting OPEC efforts to cut output.
Saudi Aramco, the world's largest state-owned oil company by output, will supply refiners in Asia with the full volume of oil this month under annual contracts, and Mediterranean buyers will get the same amount as last month. The Saudi plan contrasts with OPEC President Edmund Daukoru's letter to the group's members to cut output by 1 million barrels a day starting Nov. 1.
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``History shows that OPEC deals only work when the Saudis are on board,'' said Bill O'Grady, an analyst with AG Edwards & Sons in St. Louis. ``Allocating the cuts is always the problem. The poor countries want the rich ones to take the hit and the rich ones will only do that if a cut is in their best interest.''
Crude oil for November delivery fell 59 cents, or 1 percent, to $59.37 a barrel at 10:01 a.m. on the New York Mercantile Exchange. Prices are down 24 percent from the record of $78.40 reached July 14 amid concern that fighting in Lebanon between Israel and the Islamic militia Hezbollah, which is supported by Iran, would spread through the Middle East.
Traders and refinery officials who got notices from Saudi Aramco declined to be identified because of confidentiality agreements. Separately, the company told global major oil companies it would lower November supplies by 5 percent, Reuters said yesterday.
Saudi Aramco sells oil under annual contracts that customers renew each year. Buyers are told each month how much oil they can get the next month so arrangements to ship the cargoes can be made. Buyers in the Mediterranean have received 70 percent of their contracted Saudi volumes since early 2005, and that will continue in November.
Daukoru's Proposal
Daukoru wrote letters to ministers in the Organization of Petroleum Exporting Countries on Oct. 8 asking them to join the proposed cutback, said the spokesman, who declined to be identified. If they agree, OPEC would lower its official ceiling on output from the current 28 million barrels a day. Indonesian oil minister Purnomo Yusgiantoro said today he got such a letter.
``The impact of OPEC's recent jawboning has been reduced by the Saudi news,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``It is important to not read too much into this.''
Voluntary Cutbacks
OPEC is trying to turn existing ``voluntary'' cutbacks by several members into a group-wide, formal accord. Kuwaiti Oil Minister Sheikh Ali-Jarrah al-Sabah said yesterday ``everyone is in agreement for a cut.''
Saudi Arabia is the world's largest oil exporter and accounts for almost a third of OPEC's output. The country hasn't officially commented on whether it's taking part in any reduction in OPEC's supplies.
``There are a lot of reasons for the Saudis to keep on pumping at the present rate,'' O'Grady said. ``The Saudis will do what is in their best interest both economically and geopolitically. Lower prices will hurt rivals in OPEC such as Iran and Venezuela.''
So far, Nigeria and Venezuela have announced ``voluntary'' cutbacks totaling a combined 170,000 barrels a day. Four other countries, Saudi Arabia, Kuwait, Libya and Algeria, have also agreed to informal cutbacks, Daukoru's spokesman said on Oct. 8, without giving further details.
Merrill Lynch & Co., the world's third-largest securities firm by market value, lowered its forecast for New York-traded oil for the fourth quarter on high inventories and weak demand, Francisco Blanch, senior oil strategist, wrote today in an e- mailed report.
The average price of West Texas Intermediate, the U.S. benchmark, will fall to $61 a barrel in the fourth quarter from $67 a barrel on concern about ``very high'' inventories and the possibility of a warmer-than-normal winter, Blanch said. ``We've been bearish for the past three or four months on the basis of growing'' fuel surplus.
Brent crude oil for November fell 64 cents, or 1.1 percent, to $59.90 a barrel on the London-based ICE Futures exchange. Brent touched $57.70 on Oct. 4, the lowest since Dec. 30.
Saudi Aramco, the world's largest state-owned oil company by output, will supply refiners in Asia with the full volume of oil this month under annual contracts, and Mediterranean buyers will get the same amount as last month. The Saudi plan contrasts with OPEC President Edmund Daukoru's letter to the group's members to cut output by 1 million barrels a day starting Nov. 1.
Perform A Background Check On Anyone, Anywhere In The World
``History shows that OPEC deals only work when the Saudis are on board,'' said Bill O'Grady, an analyst with AG Edwards & Sons in St. Louis. ``Allocating the cuts is always the problem. The poor countries want the rich ones to take the hit and the rich ones will only do that if a cut is in their best interest.''
Crude oil for November delivery fell 59 cents, or 1 percent, to $59.37 a barrel at 10:01 a.m. on the New York Mercantile Exchange. Prices are down 24 percent from the record of $78.40 reached July 14 amid concern that fighting in Lebanon between Israel and the Islamic militia Hezbollah, which is supported by Iran, would spread through the Middle East.
Traders and refinery officials who got notices from Saudi Aramco declined to be identified because of confidentiality agreements. Separately, the company told global major oil companies it would lower November supplies by 5 percent, Reuters said yesterday.
Saudi Aramco sells oil under annual contracts that customers renew each year. Buyers are told each month how much oil they can get the next month so arrangements to ship the cargoes can be made. Buyers in the Mediterranean have received 70 percent of their contracted Saudi volumes since early 2005, and that will continue in November.
Daukoru's Proposal
Daukoru wrote letters to ministers in the Organization of Petroleum Exporting Countries on Oct. 8 asking them to join the proposed cutback, said the spokesman, who declined to be identified. If they agree, OPEC would lower its official ceiling on output from the current 28 million barrels a day. Indonesian oil minister Purnomo Yusgiantoro said today he got such a letter.
``The impact of OPEC's recent jawboning has been reduced by the Saudi news,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``It is important to not read too much into this.''
Voluntary Cutbacks
OPEC is trying to turn existing ``voluntary'' cutbacks by several members into a group-wide, formal accord. Kuwaiti Oil Minister Sheikh Ali-Jarrah al-Sabah said yesterday ``everyone is in agreement for a cut.''
Saudi Arabia is the world's largest oil exporter and accounts for almost a third of OPEC's output. The country hasn't officially commented on whether it's taking part in any reduction in OPEC's supplies.
``There are a lot of reasons for the Saudis to keep on pumping at the present rate,'' O'Grady said. ``The Saudis will do what is in their best interest both economically and geopolitically. Lower prices will hurt rivals in OPEC such as Iran and Venezuela.''
So far, Nigeria and Venezuela have announced ``voluntary'' cutbacks totaling a combined 170,000 barrels a day. Four other countries, Saudi Arabia, Kuwait, Libya and Algeria, have also agreed to informal cutbacks, Daukoru's spokesman said on Oct. 8, without giving further details.
Merrill Lynch & Co., the world's third-largest securities firm by market value, lowered its forecast for New York-traded oil for the fourth quarter on high inventories and weak demand, Francisco Blanch, senior oil strategist, wrote today in an e- mailed report.
The average price of West Texas Intermediate, the U.S. benchmark, will fall to $61 a barrel in the fourth quarter from $67 a barrel on concern about ``very high'' inventories and the possibility of a warmer-than-normal winter, Blanch said. ``We've been bearish for the past three or four months on the basis of growing'' fuel surplus.
Brent crude oil for November fell 64 cents, or 1.1 percent, to $59.90 a barrel on the London-based ICE Futures exchange. Brent touched $57.70 on Oct. 4, the lowest since Dec. 30.
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