Oil prices drop slightly as traders speculate on OPEC cuts

Oil prices dropped Friday in what analysts called a correction following earlier rises inspired by fears of a possible cut in OPEC output.

Light, sweet crude for November delivery fell 51 cents to US$62.25 a barrel in electronic trading on the New York Mercantile Exchange at midafternoon in Europe. Intraday trading Thursday took prices as high as US$64 a barrel.

Brent crude futures for November on London's ICE exchange were down 55 cents at US$61.99 a barrel.

In other Nymex trading, heating oil dropped 2.76 cents to US$1.6862 a gallon, and unleaded gasoline futures fell 1.86 cents to US$1.4825 a gallon. Natural gas futures for November delivery fell 6.6 cents to US$5.326 per thousand cubic feet.

Tetsu Emori, a trader with Tokyo-based Mitsui Bussan Futures, said prices were "tilting to the upside" and that the US$60 level had a lot of support. He noted that prices are still low compared to the intraday record of US$78.40 a barrel set on July 14.

Market participants are assuming that the Organization of Petroleum Exporting Countries, knowing that global fuel demand is still strong, will want to reduce supply to keep revenues up, reports AP.

"I think individual OPEC countries may cut production on their own," Emori speculated, "although actually the production of OPEC is less than its ceiling."

Fimat USA analyst John Kilduff said Thursday that there are conflicting reports circulating, but recent tanker reports have suggested a slight reduction in production, and Nigeria is expected to reduce exports. Nigeria, Africa's biggest oil exporter, has had to block much of its production this year due to militant attacks on oil facilities and kidnappings of oil workers.

The weekly U.S. Energy Department petroleum supply snapshot showed Wednesday that U.S. inventories of crude oil fell by 100,000 barrels to 324.8 million barrels, or 5 percent more than last year.

The Energy Information Administration, the department's statistical arm, said domestic inventories of gasoline increased by 6.3 million barrels last week to 213.9 million barrels, or 9 percent above year-ago levels.

Inventories of distillate grew by 2.6 million barrels to 151.3 million barrels, or 15 percent above year-ago levels.