US oil glut leads to price fall

Warmer than expected weather has kept US crude inventories high

Crude oil prices have fallen $2 to under $59 a barrel as warm weather reduces demand for heating fuels and helps to maintain large US stockpiles.

US light crude fell $2.02 to $58.73 a barrel in early New York trading, while Brent slipped $2 to $59.08 in London.

Oil prices have now fallen 25% since they hit a record of more than $78 in mid-July.

In a bid to stabilise prices, the Opec producers' group has agreed to cut output by 1.2 million barrels per day.

Supply reductions

Opec, whose 11 members - including Saudi Arabia, Kuwait and the United Arab Emirates (UAE) - produce about 40% of world oil supplies, has said it will introduce the cuts from 1 November.

Some analysts doubt that the cuts will be fully implemented - only Saudi Arabia, Iran and the UAE have so far warned customers of supply reductions.

The cuts in production will take a long time to have any affect on US oil stocks, because oil shipments take weeks to travel from the Gulf.

"What is going to affect pricing in the coming weeks will really depend on how cold it gets in the Northern Hemisphere winter and the broader global economic outlook," said Victor Shum, an energy analyst at Purvin & Gertz in Singapore.