Oil eases in Asian trade ahead of OPEC meeting

September 09, 2009 09:14:51 PM

• A⁺ 
• A^-
• |
• 
• |
• 
• |
• 

Oil fell in Asian trade Wednesday after overnight gains, spurred by a weakening US dollar and gold's surge to an 18-month high above 1,000 dollars an ounce, analysts said.

Analysts said crude was expected to trade in a narrow range as investors waited for a key OPEC ministerial meeting to begin later Wednesday in Vienna in which the oil cartel is to decide on its production quotas.

New York's main contract, light sweet crude for October delivery eased two cents to 71.08 dollars.

Brent North Sea crude for October delivery was 20 cents lower at 69.22 dollars.

Analysts said the dip in crude prices was expected to be temporary given the weak greenback, which makes dollar-priced oil cheaper for buyers using stronger currencies.

"A weak dollar spreads the idea that oil can be a hedge against the dollar (and) we’re talking about stronger economic performance now and oil is one of the commodities that benefits from that," said Bart Melek of BMO Capital Markets.

"The dollar is certainly a big factor," Melek said.

Analysts expect the Organisation of the Petroleum Exporting Countries (OPEC) to stick to its existing production quotas when they meet later Wednesday in Vienna.

"Given the improvement in oil prices since late-2008/early-2009, there is little pressure to adjust production in order to press oil prices higher," analysts from the Commonwealth Bank of Australia said in a report.

"Indeed, further large increases in oil prices may be detrimental to international economic recovery."

OPEC's leading member Saudi Arabia gave an upbeat view of the oil market on Tuesday as ministers gathered in Vienna looking to hold the flow of crude steady amid cautious talk of an economic recovery.

"The market is very stable and healthy," Saudi Arabian Oil Minister Ali al-Naimi said on arriving in the Austrian capital for the meeting.

OPEC members, which pump 40 percent of the world's oil, agreed in late 2008 to remove a massive 4.2 million barrels of daily output from the market as it sought to prop up crumbling prices.

Oil prices, which peaked above 147 dollars in July last year before tumbling to 32 dollars in December, have doubled since the start of 2009 and recently touched the 75 dollar mark briefly.