Oil keeps sliding as OPEC opens taps

Oil keeps sliding as OPEC opens taps

Reuters, London

Oil prices fell further on Tuesday, bringing losses so far this week to more than a dollar a barrel as extra supplies from OPEC eased worries over a summer fuel crunch.

U.S. light crude fell 38 U.S. cents to US$37.21 a barrel, down 12 percent from a 21-year peak struck on June 2 at $42.45. London's Brent crude was 62 cents cheaper at $34.87 a barrel.

Analysts said estimates that the Organisation of the Petroleum Exporting Countries was pumping at the fastest rate in nearly four years and that fuel stockpiles were building had encouraged a sell-off, led by speculative investment funds.

"People seem more certain that the higher supply is coming through from OPEC," said analyst Steve Turner of Commerzbank. "We're still in the trend established in the last two weeks, which is one of lower prices following stock builds."

Output by the 10 OPEC members bound by quotas was expected to rise by 800,000 barrels per day (bpd) in June, said tanker tracking consultancy Petrologistics.

That would bring the OPEC-10 production to 27.4 million bpd, far in excess even of new higher formal output limits of 25.5 million bpd that come into force in July.

Petrologistics reckoned output from Iraq, exempt from a quota, was 2.3 million bpd, taking overall OPEC production to 29.7 million bpd this month.

Algerian Energy Minister Chakib Khelil said on Tuesday the fall in prices was proof OPEC still had power to influence oil markets.

OPEC early this month decided to raise production by two million bpd from July 1 and by another 500,000 bpd from August 1. It meets again on July 21 when it could review the second stage of the deal.

Khelil said OPEC probably would go ahead with the second stage of the output increase and that high production levels were justified by projections for strong demand growth in the third and fourth quarters.

"For the time being we have already taken the decision. But in July we will meet again and we will probably go for a decision to increase," Khelil told reporters.

Data expected on Wednesday from the U.S. Energy Information Administration was predicted to show a rise of 1.55 million barrels in U.S. crude stocks.

A Reuters poll of eight analysts also forecast U.S. gasoline stocks would increase by 1.4 million barrels as U.S. refineries ramp up production to meet summer vacation demand.

U.S. gasoline has been leading prices lower and fell another 1.15 cents to $1.1410 on Tuesday.