Page last updated at 20:07 GMT, Wednesday, 10 September 2008 21:07 UK

Oil falls despite Opec output cut

Chakib Khelil (10 September 2008)
Mr Khelil said Opec would re-assess the situation at the end of the year

Brent crude has fallen back below $100 a barrel as signs of weaker global oil demand has offset Opec's surprise decision to reduce output levels.

Despite initially rising following Opec's announcement, Brent lost $1.37 to $98.87 a barrel.

US crude also ended lower, falling 68 cents to settle at $102.58.

After talks in Vienna, Opec's member states decided to cut daily production levels by 520,000 barrels, starting within 40 days.

'Changing lifestyles'

While the news initially saw oil prices rise, they then fell back, helped by the International Energy Agency (IEA) cutting its estimate for global oil demand this year and next.

Opec appear genuinely concerned that the bottom is falling out of global demand
Energy analyst Antoine Halff

The IEA - which had asked Opec to keep its output unchanged - said consumers in industrial nations were changing their lifestyles in response to high prices.

Oil's fall from the record prices seen in July has helped the US dollar, which hit an 13-month high against the euro on Tuesday.

The price of crude has since fallen by nearly 30% as a global economic slowdown has reduced demand for oil.

Opec members will re-assess production levels when the meet again at the end of the year.

The 13-nation group, whose members include Saudi Arabia, Iran and Venezuela, has around two-thirds of the world's known oil reserves.

Hurricane background

Energy analyst Antoine Halff said Opec was worried about falling global oil demand.

"The ministers appear genuinely concerned that the bottom is falling out of global demand," he said.

"Their panic is a testament to how soft the market has become. It is likely to grow even softer."

Another factor oil traders are having to consider is the latest hurricane in the Gulf of Mexico.

Hurricane Ike has strengthened to a category two story and is on target to hit the Texas coast on Saturday.

Some oil facilities in the Gulf of Mexico have been evacuated as a precaution.




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