By Margot Habiby
Oil fell to a two-week low in New York on speculation that OPEC may raise output quotas when the group meets in Vienna tomorrow.
Futures slipped as much as 1.3 percent after a Gulf delegate with knowledge of the matter said the Organization of Petroleum Exporting Countries will increase output targets to help replace missing supplies from Libya and meet demand growth later this year. OPEC will likely raise output quotas by 1.5 million barrels a day, analysts from Societe Generale SA and Morgan Stanley said in reports today.
“Crude has fallen as OPEC tries to get consensus to raise quotas to get more in line with what it’s actually producing,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York.
Crude for July delivery dropped $1, or 1 percent, to $98.01 a barrel at 9:58 a.m. on the New York Mercantile Exchange. The contract touched $97.74, the lowest price since May 24. Oil is up 37 percent the past year.
Brent crude for July delivery gained 55 cents, or 0.5 percent, to $115.03 a barrel on the London-based ICE Futures Europe exchange.
OPEC is producing 2 million barrels a day above its official ceiling, the delegate said, declining to be named because he isn’t authorized to speak publicly. All the group’s ministers agree on the need to raise output, the person said.
OPEC will likely raise output quotas by 1.5 million barrels a day, analysts from Societe Generale SA and Morgan Stanley said in reports today.
The increase is likely to come from actual production, according to the note by Michael Wittner in New York and other Societe Generale analysts.
“This meeting result is not a slam dunk, though, with a 65 percent probability and a medium level of conviction,” Wittner said.
Morgan Stanley said the gain to production will probably be announced either tomorrow or at a later date this summer.
The producer group announced its biggest-ever supply cuts in late 2008 amid a collapse in global demand, capping production at 24.845 million barrels a day for all members except Iraq, which is exempt from the quota system. Its compliance rate with those limits was 69 percent in April, OPEC said in its monthly report on May 12.
Venezuelan Oil Minister Rafael Ramirez said yesterday the group is unlikely to raise output limits, as he arrived in the Austrian capital.
The 11 OPEC members bound by the output quotas produced 26.2 million barrels a day in May, or about 1.4 million barrels more than they pledged, according to a Bloomberg News survey of analysts, producers and oil companies. Total supply including Iraq was 28.9 million barrels a day last month.
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