Oil prices dive below dollars 17 a barrel

CRUDE oil prices tumbled below the psychologically important dollars 17-a-barrel mark yesterday due to continued overproduction by Opec and high stock levels, writes Neil Thapar.

Physical Brent available for immediate delivery slipped 55 cents to dollars 16.70 while the March futures contract closed 35 cents down at dollars 17.10 after a low of dollars 16.90.

The fall comes despite widespread disruption in North Sea production due to bad weather. Prices have now fallen more than dollars 4 since October.

Dealers said the immediate outlook remained bearish because of high output by members of Opec, who are estimated to be supplying about 500,000 barrels a day above demand. The cartel produced about 25.4 million barrels a day last month.

Sentiment has also been hit by fears that the new Clinton administration might lead to the resumption of Iraqi oil exports. It is also felt that demand will remain weak due to an economic slowdown in Europe this year.

Jeremy Hudson, oil analyst at Lehman Brothers International, believes that oil prices are likely to fall further in the run-up to next month's Opec meeting.