Oil prices fall as OPEC considers output boost

Oil Prices retreated Tuesday as OPEC ministers discussed whether to ramp up oil production in the wake of the Libyan uprising.

Benchmark West Texas Intermediate crude for April delivery fell 55 cents to US$104.89 per barrel at mid-afternoon on Tuesday.

In London, Brent crude dropped US$1.78 to US$113.26 per barrel on the ICE Futures exchange.

Libya produced 1.6 million oil barrels per day before fighting forced companies to evacuate workers. Most of that production has been shut down.

Saudi Arabia's oil minister said the kingdom has about 3.5 million barrels per day of spare capacity that could be brought on line.

"Saudi Arabia will continue to reliably meet the world's petroleum needs," minister Ali Naimi said.

Boosting production now might cool off overheated energy prices, but experts warn OPEC could weaken its ability to manage global supplies later this year.

Michael Lynch, president of Strategic Energy & Economic Research, said it also won't address the basic fear that has been pushing oil prices higher for the past few weeks.

The main concern isn't whether the cartel can replace Lybia's daily exports. It's whether the governments of Saudi Arabia and Iran will change in the wave of pro-reform uprisings that already have ousted leaders in Egypt and Tunisia.

Raising production now "would have a minor calming effect on the market," Lynch said. "Other than that, it's not going to take us back below US$100" per barrel.

Oil prices have jumped about $20 per barrel since mid-February when the Libyan uprising escalated.

Experts agree that a resolution to that crisis won't necessarily stop oil prices from heading higher.

Analyst and oil trader Stephen Schork said the market is waiting for a sign that the entire region is headed toward a peaceful outcome that will keep crude exports flowing. "That's months away," he said.

That's bad news for drivers in the US, where the average price for gasolene has risen about 39 cents per gallon in three weeks, topping US$3.50.

In other Nymex trading for April contracts, heating oil lost 5.66 cents at US$3.0091 per gallon and gasolene futures gave up 5.62 cents at US$2.9477 per gallon. Natural gas lost less than a penny to US$3.915 per 1,000 cubic feet.

- AP