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Oil falls to 3-month low as OPEC output rises



2008-08-04 14:12:55

Oil falls to 3-month low as OPEC output rises

NEW YORK (Reuters) –

Oil fell to a three-month low on

Monday, pressured by evidence of rising OPEC output in the

midst of declining demand in the United States and Europe.

The losses extended a steep slide from the mid-July peak

above $147 a barrel and came despite a storm in the Gulf of

Mexico that was curbing oil output, shipping and refining.

“Crude futures are down despite a brewing storm and that

shows you how momentum has shifted in this market,” said Phil

Flynn, analyst at Alaron Trading in Chicago.

U.S. light crude fell $3.69 to settle at $121.41 a barrel

on the New York Mercantile Exchange, after falling as low as

$119.50, the lowest level since early May. London Brent fell

$3.50 to $120.68.

The losses came after a Reuters survey showed OPEC supply

rose for a third consecutive month in July mainly because of

increased output from the world’s top exporter Saudi Arabia.

The boost in production from OPEC comes as soaring energy

prices and an economic slowdown cut into energy consumption in

the United States and Europe.

The bearish impact was countered by Tropical Storm Edouard,

which was barreling across a major oil and gas producing area

of the northern Gulf of Mexico.

The storm affected shipping and port operations, triggered

evacuations and minor production outages offshore, and forced

at least one refinery along the coast to shut.

The storm was expected to come ashore at close to hurricane

strength Tuesday on the Texas-Louisiana coast.

Traders also were nervous that supplies could be disrupted

as a result of tension between the West and the world’s

fourth-largest oil producer, Iran.

“Despite all these bullish inferences a lower market must

mean that participants have an infinitely greater concern about

a deteriorating global economy,” Mike Fitzpatrick, vice

president at MF Global, said in a note.

The head of Iran’s revolutionary guard was quoted as saying

Iran could close the Straits of Hormuz, a key Gulf shipping

route, if it were attacked over its nuclear program.

Mohammad Ali Jafari’s comments followed a telephone meeting

between Iran and representatives of six world powers about

Tehran’s nuclear program in which the Islamic Republic said it

would press ahead in spite of a demand to halt the work.

Oil supplies already have been disrupted from Nigeria, the

world’s No. 8 oil exporter, as a result of militant attacks

that have cut about a fifth of its production.

Gunmen kidnapped two French expatriates near the country’s

oil industry hub of Port Harcourt in the restive Niger delta,

military and security sources said on Sunday.

High energy prices have been of concern in the United

States, the world largest consumer of oil already battered by a

housing and credit crisis.

U.S. presidential candidate Barack Obama called on Monday

for swapping some of the oil in the country’s Strategic

Petroleum Reserve, a move his campaign said was aimed at

lowering the price of gasoline.

(Reporting by Richard Valdmanis in New York, Fayen Wong in

Perth, Ikuko Kao and Golnar Motevalli in London; editing by

Marguerita Choy)

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