Oil Declines Despite More OPEC Cuts

Oil prices slipped Monday despite OPEC ‘s need to cut production further this year to deal with an oversupply in the market.

Light, sweet crude for December delivery dropped 42 cents to $58.72 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe, after earlier trading as low as $58.50.  December Brent crude on London's ICE Futures exchange fell 33 cents to $58.82 a barrel. 

OPEC President Daukoru described the current price of oil as "low."  Regarding OPEC's decision last month to cut production effective November 1, he said the effects of the reduced output have yet to be seen but would be soon.  He said it will probably be the middle of the month "before you will start to believe us."

Daukoru said that when OPEC meets in December they will discuss production, "but it looks as if some further mopping up will be necessary."  "The market is clearly oversupplied, clearly oversupplied," he said.  Analyst group PVM Oil Associates also said Monday that some OPEC members were hinting at another possible cut in production.  "Despite the announcement to reduce output by 1.2 million barrels per day, last month oil prices have remained at a relatively weak level," PVM said.

Oil prices have retreated significantly from a summer time high above $78 a barrel, trading in a range of around $57-$61 a barrel over the past month, as traders look for demand clues in weather and economic forecasts and weigh them against OPEC's plans to curb supplies. 

On Friday, a bomb hoax at a huge BP refinery in Whiting, Ind., rattled the market.  Prices also jumped after U.S. diplomats warned that militants in Nigeria were preparing a major new wave of attacks and kidnappings across the country's oil-rich delta region.

On Monday, a government official said protesters invaded the Tebidaba oil pumping station run by Agip in southern BayelsaState and forced workers to shut it down. Agip is a subsidiary of Italian energy company Eni SpA. 

Since the beginning of the year, militants have taken dozens of oil workers in the southern oil region hostage.  The violence has pared about one quarter from Nigeria's normal 2.5 million barrel daily production.

Last week, U.S. crude oil inventories rose by 2 million barrels to 334.3 million barrels. Demand is currently low, as the cold winter season in the Northern Hemisphere has yet to set in.