US oil prices yesterday hit their lowest in more than a month on continued profit-taking as producer group OPEC sought to increase its tight spare capacity and the US summer driving season approached its end.
US light crude closed down 90 cents to $42.28 (€35.07) a barrel after falling to $41.30 by midday, the lowest level since July 26th. Oil has dropped more than $7 from highs near $50 a barrel earlier in the month as hedge funds, responsible for part of the recent price surge, take profits.
Brent crude trade on London's International Petroleum Exchange was shut for a public holiday.
Despite last week's slide, oil prices remain about a third higher than at the end of 2003 as producers pump close to full tilt to match soaring demand.
The head of the OPEC producers cartel said yesterday that the group, which controls more than half of world exports, aimed to increase spare output capacity by about one million barrels per day (bpd) in the next few months in an effort to bring down prices.
OPEC is estimated to be pumping close to 30 million bpd, its highest level since 1979, in an effort to dampen this year's price rally.
"In response to expected demand growth in the near future, member countries have plans in place to further increase production capacity by around one million bpd towards the end of this year and into 2005," OPEC president Mr Purnomo Yusgiantoro said in a written statement.
"In addition, plans for additional capacity expansions are available and could be enacted soon. However, this capacity would typically become available around 18 months after commencement of this process."
Only Saudi Arabia has any significant spare capacity within the 11-member producers cartel, which is due to meet on September 15th to review output policy.
Also pressuring prices is the looming end to the holiday season, which typically means a decline in motorist demand for gasoline. The summer driving season traditionally ends on the Labour Day weekend.
Keeping a floor under the oil price dive, Iraqi oil exports ran at a reduced 1.4 million bpd yesterday, compared with two million bpd a week ago. An Iraqi oil official said work to repair sabotaged pipelines would take five days.
Turmoil in Iraq and attacks on oil infrastructure have been a major factor in underpinning the sharp rally in crude prices this year. - (Financial Times Service)
