Oil price falls as Opec hints it may move to raise output

Though still near record highs, the price of crude oil fell for a third consecutive session yesterday to around $75 a barrel, as Opec indicated that it may be willing to raise output to keep the price down and the world safe from slump.

Opec officials dropped a few hints that they would be loosening the taps, sending the price of Brent crude as low as $74.85 a barrel yesterday afternoon. It closed at $74.91. Oil was also marked lower on better than expected news on the ability of US refineries to maintain production.

"If the oil market needs it, Opec will inject more oil into it," Javad Yarjani, the head of Opec affairs at Iran's oil ministry, said. (Iran is the second-biggest producer in Opec.) Qatari Oil Minister Abdullah bin Hamad Al-Attiyah added: "I have received no complaints from any customers about a shortage of crude supplies. Opec should move when there is strong evidence that there is a shortage in crude supplies" - which signal there now is as inventories are running lower. Recently the president of Opec, Mohamed al-Hamli, admitted that: "We are concerned about the higher price, because we don't want to go through a recession".

Opec's tentative moves come as a reply to calls from Washington and the Inter-national Energy Agency. Guy Caruso, the head of the analytical arm of the US Department of Energy, said recently: "We need more production in the second half of the year, or we would have very low inventory."

With the world economy growing at 5 per cent or so and no sign of China's near insatiable demand for natural resources subsiding, it may even be beyond Opec's resources to stabilise matters. Even now the oil price is within 10 per cent, in real terms, of its all-time high reached in the "spike" after the Iranian revolution in 1979-80.

Crude oil rose to a record $78.49 a barrel last summer when fighting in Lebanon between Israel and Hezbollah looked to spread throughout the region, after which the price fell so much that Opec agreed to cut output by 1.7 million barrels per day, or about 6 per cent, to bolster falling prices.

The price sank to around $50 in January. Oil ministers from Opec's 12 members will meet on 11 September in Vienna to discuss production targets. The Opec group accounts for around 40 per cent of global crude supply.

The continuing loss of Iraq production also tends to inflate crude prices. With 112 billion barrels of proven oil, Iraq ranks second in the world behind Saudi Arabia in reserves, little of which is getting to world markets.