Oil prices fell to fresh 5-month lows on Thursday as traders remained unimpressed by OPEC’s deal to cut supplies in an effort to head off a glut.
U.S. light crude futures were down $1.00 at $25.65 a barrel, the lowest price since mid-November and down 16 percent this week alone. London benchmark Brent was 61 cents lower at $23.65 a barrel.
OPEC pulled a surprise on Thursday by raising official output limits, effectively legitimizing a portion of extra supplies the cartel pumped to stop prices spiking during the U.S.-led war in Iraq.
Ministers agreed to lift the production ceiling by 900,000 barrels per day (bpd) to 25.4 million bpd effective from June 1 for 10 member countries, excluding Iraq.
They claimed supplies to the market would actually drop by 2.0 million bpd from their estimate of average production in February and March of 27.4 million bpd. The cartel is trying to prevent crude dropping below its $25 target.
Analysts said OPEC's estimate of its recent production was much too high and that any reduction would be much less than 2.0 million bpd.
"It's all smoke and mirrors. They're trying to create the impression that they are cutting back more than they are," said Nauman Barakat of Fimat International Banque in London.
Oil has dropped about 30 percent in barely a month as Middle East oil flows escaped severe disruption from war in Iraq. Global economic weakness is also weighing on demand.
Typically. consumer demand declines in the second quarter of the year, which falls between the northern winter and before the U.S. summer vacation driving season gets into gear.
The extra oil pumped by OPEC in recent months has begun to rebuild stocks in the United States. The U.S. government said on Wednesday inventories jumped 3 percent last week.
Prices on average so far this year have proved damagingly high for consumer nations. U.S. crude is running at $32.66 a barrel to date and North Sea Brent at $29.52.
Source: SPA
