Oil prices recover losses

Opec meeting: Dealers are taking note

Crude oil prices edged up in early trading in London, recovering from a two-week low hit on Wednesday.

At 0925 GMT, the price of the world benchmark Brent blend for October delivery had risen 39 cents to $31.92 a barrel.

In New York, light, sweet crude futures had closed down 46 cents at $33.82 a barrel on Wednesday, amid reports that Saudi Arabia would quickly boost output and that the US could release emergency supplies.

Oil prices had climbed to a 10-year high of $34.60 last week.

Dealers said Wednesday's drop in New York prices was prompted by evidence that Saudi Arabia was meeting allocation targets, following a meeting of the Organisation of Petroleum Exporting Countries last weekend which pledged to boost oil output by 800,000 barrels per day.

"This is the contemplation after the knee-jerk reaction," said Peter Gignoux of Salamon Smith Barney. "Opec has promised a bunch more oil. Maybe we should listen to what they say."

Saudi Arabia is one of the few oil-producing countries not pumping at full volume.

US 'taps reserves'

Dealers also speculated that the US would tap the Stategic Petroleum Reserves for oil to be converted into heating oil.

The reserves would need to be opened this month to ensure supplies of heating oil by the time of the US presidential election in November, dealers said.

Analysts warned that temporary hikes in oil prices would continue as countries replenished low oil stocks.

Opec's decision to raise production raised the output ceiling to 26.2m barrels per day from 1 October.

The organisation also said it would review production levels again in November.

Some analysts worry that, with stocks low, a harsh winter could boost the oil price again, especially in the United States.