Crude falls as OPEC pumps more

Reuters, Monday 30 May 2011

Brent crude edged below $115 a barrel on Monday on expectations that OPEC's oil output in May would come in higher than April

Brent fell 8 cents to $114.95 a barrel while U.S. crude fell 8 cents to $100.52 at 0409 GMT.

More oil from top exporter Saudi Arabia and fellow OPEC members Nigeria and Iraq should push the producer-group's total output higher and more than compensate for a further fall in Libyan supply in May, a Reuters survey found on Friday.

The U.S. driving season traditionally kicks off on the weekend of Memorial Day, a public holiday taking place on Monday. London traders were also out on Monday for a public holiday there, so trading would likely be thin.

As motorists drive out on vacation, U.S. gasoline demand reaches its annual peak. With uncertainty over the strength of the recovery in the world's largest economy and with high U.S. gasoline prices a matter of concern for President Barack Obama, demand for the fuel will be closely watched.

"There are expectations of prices picking up purely because of the drive time in the U.S.," said Jonathan Barratt of Commodity Broking Services managing director in Sydney. "We feel that might actually support crude prices."

Still, government data ahead of the driving season last week showed gasoline demand over the previous four weeks down 2 percent on the year.

High energy costs have sparked global concern as a drag on economic growth. A slowdown in economic expansion would in turn slow the growth in demand for fuel.

In France, the Group of Eight world leaders agreed that the global economic recovery was becoming more "self-sustained", although they said higher commodity prices were hampering further growth.

Fighting in Libya has almost shut down output in what used to be Africa's third-largest producer, but supply from all 12 members of OPEC is expected to average 28.90 million barrels per day (bpd) this month to help cover the gap.

This is up from a revised 28.79 million bpd in April, the Reuters survey of oil companies, OPEC officials and analysts found.

Ongoing unrest in small, independent oil producer Yemen has had limited influence on oil prices. Yemeni forces loyal to President Ali Abdullah Saleh opened fire on protesters in the southern city of Taiz on Sunday, killing at least six people and wounding 120, hospital sources said.

In the capital Sanaa, seven explosions were heard on Sunday night in the district of Hasaba, the scene of week-long fighting between Saleh's forces and a rival tribe in which 115 people were killed, residents said.


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