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EDITIONS
 Tuesday, 31 December, 2002, 14:53 GMT
Oil prices slide from two-year high
Workers operating a drill bit
Opec is pledged to defend a price ceiling of $28 a barrel
Oil prices fell on Tuesday, dropping away from a two year high the previous day caused by fears of a war in the Middle East and disruption to Venezuela's exports from a national strike.

Uncertainty over future oil output caused prices to seesaw on Monday, first soaring past $33 (20.5) a barrel to their highest level since December 2000, then plunging to a 10-week low.

The fall was triggered by suggestions that the Opec oil producers cartel may increase output, and Venezuelan government predictions that exports could start to recover next week.

"It's profit taking and the expectation that Opec will pump more," a New York based trader said of Tuesday's falls.

Production pledge

The price of oil for delivery in February slipped as trading began on the New York NYMEX market on 31 December.

In out-of-hours electronic trading, it had slipped to $31.41 at 0125 GMT, down $2 from a two-year peak of $33.65 reached on Monday.

In London, the price of a barrel of benchmark Brent crude peaked at $30.60 on 30 December, but it had dropped to $28.66 by the time trading ended for 2002.

Nonetheless it closed the year costing 44% more per barrel than at the start of 2002.

"The Kuwaiti minister has said that for credibility's sake Opec will need to increase production by 500,000 barrels a day and that began the sell-off," said Chris Mennis of California-based energy trader New Wave Energy.

Kuwait's acting oil minister has been reported as saying that Opec, the Organisation of Petroleum Exporting Countries, might hold an emergency meeting to discuss boosting output.

Opec has a commitment to raise output if the oil price exceeds $28 a barrel for for 20 days in a row.

Hopes of an end to the squeeze on output got a boost from Venezuela's oil minister Rafael Ramirez, who said exports would improve to at least a third of normal levels next week.

Strike

Venezuela is the world's fifth largest oil exporter and the month-long strike gripping its national oil firm has had a strong impact on global prices.

The government has sent troops to take control of some oil facilities and sacked about 90 oil officials.

Mr Ramirez said output Venezuela would pump about 1.2 million barrels of oil per day (bpd) from next week, up from output of between a quarter of a million and half a million barrels at present.

Venezuela produced about 3 million bpd in November.

Fears of war in the Middle East have pushed oil prices well above their $29.88 peak after the 11 September terrorist attacks last year.

See also:

30 Dec 02 | Business
30 Dec 02 | Business
30 Dec 02 | Americas
24 Dec 02 | Business
24 Dec 02 | Business
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