LONDON: Oil prices slipped for a second day on Tuesday, falling towards $81 a barrel after Saudi Arabia signaled OPEC would maintain current production levels at the group’s meeting and as the dollar rallied against the euro.
US crude for November slid 60 cents to $81.61 a barrel by 1130 GMT, off an earlier session low of $80.88 and down nearly $3 from last week’s five-month high of $84.43.
ICE Brent fell 47 cents to $83.25.
The dollar rose by 0.3 percent against a basket of currencies in Tuesday morning trade, after scrambling off recent steep lows against the euro and the yen on Monday.
"What we’ve seen this morning is the dollar is still a bit stronger, not only against the euro but also against a basket of currencies," said Andrey Kryuchenkov of VTB Capital.
A stronger dollar renders dollar-denominated commodities more expensive for non-dollar holding buyers.
The market is also awaiting the minutes of the FOMC meeting on September 21 for indications on the likely extent of a widely awaited second round of quantitative easing in the United States, commonly referred to as QE2, although many analysts said the market has already priced this in.
"We believe the actual onset of QE2 will further lift oil prices," Michael Lo from Nomura Global Equity Research said in a note.
"However, given the different starting points for oil prices and economics between QE1 and QE2, we believe the impact of QE2 will be less pronounced."
"Ideal" price
Saudi Arabian Oil Minister Ali Al-Naimi said he was happy with the oil market as he arrived in Vienna on Monday for the first meeting of the Organization of the Petroleum Exporting Countries (OPEC) in seven months, to take place this Thursday.
Naimi also said prices of between $70 and $80 were "ideal," indicating the producer group’s most powerful member has no plans to pursue higher prices.
"The market is very well balanced, everyone is happy with the market," Naimi said. "I am comfortable with economic growth."
OPEC has not officially changed its production ceiling since December 2008. Levels of compliance with implied targets, however, have slipped to 57 percent, according to a Reuters survey, leaving plenty of scope to adjust output informally as the market dictates.
Separately, OPEC said in its monthly report on Tuesday that there is a broad consensus oil prices around their current range have helped support economic recovery and promote industry investment.
OPEC also left unchanged most forecasts for the oil market in 2011, including those for world oil demand growth and global demand for its own oil. It raised its estimate for world oil demand growth in 2010.
A Reuters poll showed US crude oil stockpiles are expected to have risen for a second straight week last week, adding 1.3 million barrels in the week to Oct. 8 due to higher imports.
Industry group the American Petroleum Institute will issue its weekly inventory report on Wednesday at 2030 GMT, a day later than usual because of Monday’s Columbus Day holiday. Government statistics from the US Energy Information Administration will follow on Thursday at 1500 GMT, also a day later than usual. –Additional reporting by Joe Brock in London and Alejandro Barbajosa in Singapore
