Oil prices fell further on Wednesday, dipping below 32 dollars a barrel but analysts warned that the price crisis was not over yet, and protests against the high cost of fuel raged on in Europe.
The benchmark North Sea Brent crude price slipped back to 31.79 dollars a barrel for October delivery in early deals here, losing 69 cents from Tuesday's closing price, as profit-taking and technical trades dominated the market.
A further hint from Saudi Arabia that it was ready to step up supplies also helped bear down on prices, which have now lost almost three dollars a barrel this week.
But prices are still three times higher than they were 20 months ago, and the surge in fuel costs has rattled governments facing the twin threats of macroeconomic instability and social unrest.
Protestors in Britain have followed the French example, with a fuel depot blockade that has already sown chaos. Similar style protests are threatening in Belgiu, Germany and Poland.
Western governments have blamed the Organisation of Petroleum Exporting Countries (OPEC) for the soaring prices, and urged it to supply more oil to cool down the overheating market.
But OPEC, which blames the high prices on fuel taxes, has already committed itself this week to increasing its output by 800,000 barrels per day, and dealers said that OPEC kingpin Saudi Arabia had gone further by starting to honour full contract volumes to US buyers.
"There was some comfort on the supply side as Saudi Arabia offered some term lifters in Europe and the US full contract volumes," the GNI brokerage noted.
But governments, captains of industry and consumers should not expect further relief in terms of prices, because the market is still unsure whether the OPEC output pledge will make any difference to prices once it kicks in on October 1.
"Our thought after the OPEC meeting is that the extra 800,000 barrels would push prices back to 30 dollars, but we would be surprised to see it below 30," said ABN Amro market analyst Peter Nicol. "For that to happen we would need some more changes" in supply.
With an election imminent in the United States, and the oil price factor turning increasingly explosive in Europe, political leaders have been drawn into the fray on both sides of the Atlantic.
British finance chief Gordon Brown fulminated that "cartels should not exercise such power anywhere" and called for "pressure on oil producing countries to raise the production and cut their price".
US President Bill Clinton said on Tuesday that Washington was closely monitoring crude oil prices and might take unspecified action if prices remained near record levels for the US winter season.
Nicol said the US gesture was having little effect on the price of oil.
"The US has got a strategic heating reserve, but it's only two million barrels, so it's a drop in the ocean," he said. "It's more politics than substance."
The main factor driving oil prices up has been the sharp drop in stocks in western countries. The American Petroleum Institute reported Tuesday that crude reserves fell another 1.9 million barrels to 288.6 million barrels in the week to last Friday.
The GNI brokerage said: "The fact that Brent is down despite what is clearly a bullish set of API figures suggests that the market is looking to come down further."
But in the medium term, with winter looming and demand likely to spike, analysts have not ruled out the 40-dollar barrel -- a phenomenon not seen since the 1990 Gulf war.
Oil prices at such levels would present a new headache to oil-dependent countries and companies, filtering through into rising inflation at national level, and hitting corporate bottom lines, economists believe.—AFP.
©--Agenece France Presse.
© 2000 Mena Report (www.menareport.com)
