LONDON – World oil prices fell on Wednesday after leading exporter Saudi Arabia said the OPEC oil cartel would go ahead with plans to increase output.
Saudi Arabian Oil Minister Ali al-Naimi said the Organization of the Petroleum Exporting Countries (search) would proceed with a 500,000 barrels per day (bpd) output hike in August, according to an industry newsletter.
Prices also came under pressure after Iraq repaired a sabotaged pipeline and restored crude exports to near-normal levels.
U.S. light crude (search) fell 63 cents to $39.02 a barrel, following a surge of more than $1 on Tuesday. Prices had earlier approached $40, a five-week peak, on fears over supply disruptions in Nigeria and Russia, but the restart of a sabotaged Iraqi pipeline soon dragged them down.
"We're over-bought near term and we're having a pull-back," said Edward Meir of Man Energy. "Plus, the Iraqi situation seems to be on the mend."
London's Brent crude (search) fell 56 cents to $36.62 after gaining around $1 on Tuesday.
OPEC's decision to raise output was "not up for review," the Middle East Economic Survey (search) quoted Naimi as saying.
The cartel had agreed to raise supplies by two million bpd from July and an additional 500,000 bpd from August to a total 26 million bpd. But some ministers have said the second stage of the increase would need to be confirmed at the group's next meeting in Vienna on July 21.
OPEC has been pumping near capacity this year, and exceeded even its higher official limits for July and August.
Events in Iraq, which has the world's second-largest oil reserves, also pulled prices down.
The country's crude exports were running at about 1.7 million bpd following repairs to a pipeline feeding oil terminals at Basra and Khor al-Amaya, a shipping agent told Reuters.
Exports had been slashed to about one million bpd following attacks at the weekend.
This is despite a report in London's Financial Times that Mikhail Khodorkovsky, YUKOS's main shareholder who is in jail facing tax evasion and fraud charges, offered to sell his 44 percent stake in a move to save the firm.
Worries over union action in Nigeria would not give the market too much support, Meir said.
"Nigerian strikes usually have a limited shelf-life, the workers can't afford to stay out of the job for long," he said.
Oil major Total's 225,000 bpd of Nigerian oil production remained shut in as the company prepared to meet labor ministry officials over union protests, a spokeswoman said.
She was not able to say when production might resume, although she expected at least a subsequent meeting with the unions to be necessary.
OPEC member Nigeria produces around 2.5 million bpd and is the fifth largest oil supplier to the United States, which has been importing more than one million bpd of Nigerian crude this year.