Oil Prices Dip on OPEC Production Decision

SINGAPORE – Crude oil prices fell Wednesday after OPEC decided to hold production steady and on anticipation that U.S. oil products inventories have grown. The decline in prices were limited by concerns over Iran’s standoff with the West over its nuclear program.

Light, sweet crude for March delivery on the New York Mercantile Exchange fell 12 cents to $67.80 a barrel in electronic trading by midday in Europe. March Brent crude futures on London’s ICE Futures exchange fell 2 cents to $65.97 a barrel.

Heating oil fell nearly a cent to $1.8406 a gallon while gasoline slipped about the same amount to $1.7970 a gallon. Natural gas gained 17 cents to $9.487 per 1,000 cubic feet.

Expectations of a build in U.S. gasoline and distillate stocks weighed on the market. According to analysts surveyed by Dow Jones Newswires, U.S. gasoline stocks are expected to have risen by 1.3 million barrels, while distillate stocks are likely up 500,000 barrels in the week ended Jan. 27.

OPEC’s decision was expected, but ministers seemed divided over whether a reduction in production could be ahead.

Qatari oil minister Abdullah bin Hamad al-Attiyah said a cut in output would be discussed at the March meeting. But Saudi Oil Minister Ali Naimi said he didn’t believe a cut would be needed then, and OPEC President Edmund Daukoru said he doesn’t see a cut as likely.

Although markets have been jittery over Iran’s standoff with the west over its nuclear ambitions, Naimi said at no time did concerns about that bear on this week’s decision.

Iran, OPEC’s second-largest oil producer, insists its nuclear program is aimed at generating electricity, but the U.S. and other countries fear the research could be used to create nuclear weapons.

The U.S., Britain, France, China and Russia say Iran should appear before the U.N. Security Council, which could impose sanctions. They have called on the International Atomic Energy Agency, the U.N. nuclear watchdog, to report the Iran case when it meets Thursday.

Even though Iran’s oil minister Kazem Vaziri Hamaneh have said Iran won’t link the country’s oil exports to its nuclear dispute, analysts said tensions over the issue would prevent any sharp decline in crude futures.

"We still feel that despite the Iranian oil minister’s assertions, the threat of halting oil exports is a very effective bargaining chip, which is maintaining a healthy risk premium in the market," said Sucden Commodity brokers.

In his State of the Union speech Tuesday night, President Bush declared that America must break its dependence on Mideast oil. He outlined plans to increase federal spending on research into alternative motor fuels and to set "a national goal" of replacing 75 percent of the oil now imported from the Middle East.

"America is addicted to oil which is often imported from unstable parts of the world," Bush said in the speech.

But the president’s initiatives are similar to what he has long supported and reflects many of the same alternative fuel proposals included in a broad energy bill he signed into law last summer.