Oil fell on Tuesday on expectations that Opec may increase output and following a decline in global stock markets. US oil dropped 80 cents to $96.90 a barrel by 0409 GMT, after shedding more than $1.00 earlier.
London Brent crude fell by 61 cents to $94.71 a barrel.
“Opec has been making a lot of noise about an output increase and that’s why we see weak numbers today,” said Tony Nunan, risk manager for Mitsubishi Corporation.
Iran’s oil minister Gholamhossein Nozari said at the weekend that some members of Opec were advocating an increase in production when the cartel meets in Abu Dhabi on December 5.
Oil prices were also depressed by a decline in US shares, with major indices down around 2% on Monday on investors’ concern that rising mortgage defaults and credit market losses would drag on the world’s biggest economy.
Asian shares also fell across the board on Tuesday. “Some people are worried that the US economy is heading towards a recession because that will slash the demand for oil,” said Nunan.
But he said oil prices could rebound on expectations of cold weather in the US that will draw down heating fuel stocks.
The onset of colder weather in the US Northeast, a major consumer of heating oil, has also bolstered prices as traders bet that higher winter demand will strain below-normal inventories.
US distillates inventories, which include heating oil, are likely to fall by 1.4 million barrels when data for last week is reported on Wednesday.
Crude stocks are seen down by 800,000 barrels while gasoline was expected to rise by one million barrels, a preliminary Reuters survey found.
The US dollar rose by 1% against the yen on Tuesday after Citigroup said it had reached a deal to sell a $7.5 billion stake to the Abu Dhabi Investment Authority.
The dollar jumped to 108.45 yen, pulling away from a two and a half year low hit on Monday, as the sale is expected to inject funds into the bank, which has been one of the hardest hit from the subprime mortgage defaults and resulting credit crunch. (Reuters)
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