Oil producers' cartel Opec has agreed to keep output steady at a meeting in Abu Dhabi, despite pressure on it to raise production to dampen prices.
Oil producers' cartel Opec has agreed to keep output steady at a meeting in Abu Dhabi despite pressure on it to raise production to dampen prices.
Opec will next meet on 1 February to review its decision. It said there was no reason for prices to hit $100 a barrel as there were enough oil stocks.
Opec will next meet on 1 February to review its decision. It said there was no reason for prices to hit $100 a barrel as there were enough oil stocks.
A barrel of US light sweet crude rose $1.61 to $89.93 a barrel while London Brent crude rose $1.28 to $90.81.
Oil prices initially surged $2 after the decision but then fell on concerns of a US economic slowdown.
Prices fell on Tuesday after a report downplayed Iran's nuclear ambitions.
A barrel of US light sweet crude fell 83 cents to $87.49 a barrel.
In London, Brent crude fell $1.04 to $88.49 a barrel.
"The market is divided between those that see tight supplies and those that are worried about economic weakness that might lead to a demand slowdown," said Mike Fitzpatrick, vice president at MF Global.
A credit crisis combined with rising energy and commodity prices is expected to slow US economic growth, which some energy experts say could eventually lead to a worldwide slowdown in oil demand.
Enough oil?
Enough oil?
September's decision to increase output should mean there is enough oil to meet demand for fuel this winter, Opec said.
September's decision to increase output should mean there is enough oil to meet demand for fuel this winter, Opec said.
"There is no reason for the price to go high because we have enough stocks," said Opec secretary general Abdullah al-Badri after the decision was reached.
"There is no reason for the price to go high because we have enough stocks," said Opec secretary general Abdullah al-Badri after the decision was reached.
"There is no reason whatsoever for prices to go to $100 a barrel."
"There is no reason whatsoever for prices to go to $100 a barrel."
Oil prices hit a record high of $99.29 in November.
US crude stockpiles fell to the lowest level in more than two years last week, according to government data, as fog disrupted the pace of imports into the Gulf Coast.
But inventories of refined fuels, like gasoline and distillates, rose by more than expected due to an uptick in refining activity.
Speculators blamed
Comments made prior to the meeting had made clear that a rise in output was unlikely.
Comments made prior to the meeting had made clear that a rise in output was unlikely.
"We've seen nothing yet to justify an increase or a decrease," Saudi oil minister Ali Al-Naimi said.
"We've seen nothing yet to justify an increase or a decrease," Saudi oil minister Ali Al-Naimi said.
Iranian oil minister Gholamhossein Nozari said: "Our position is that demand and supply are balanced and there is no need to increase oil on the market."
Iranian oil minister Gholamhossein Nozari said: "Our position is that demand and supply are balanced and there is no need to increase oil on the market."
Traders are now looking to the release of US inventory data later on Wednesday for direction.
Mixed views
Opec members account for 40% of the world's oil supply and many have blamed speculators, not supply, for volatile prices.
Opec members account for 40% of the world's oil supply and many have blamed speculators, not supply, for volatile prices.
The cartel's move to hold output steady will support prices, analysts said. "They will be giving another opportunity to speculators to push the market up closer to the $100 level in the short term," said consultant John Hall of John Hall Associates.
Others said the weakness of the dollar, which lowers oil exporters' earnings, has changed Opec's price target.
"Because the dollar has weakened so much over the past few months, I think Opec's price aspirations have probably shifted higher," said Helen Henton, head of commodity research at Standard Chartered Bank.
Oil prices lost ground on Tuesday, following a report that downplayed Iran's nuclear ambitions.
Oil prices lost ground on Tuesday, following a report that downplayed Iran's nuclear ambitions.
Tension between the US and Iran has contributed to the rally in oil prices.
Tension between the US and Iran has contributed to the rally in oil prices.
The US report by the National Intelligence Estimate said Iran had halted its nuclear weapons programme in 2003, contradicting the US administration's previous view.
A recent US report by the National Intelligence Estimate said Iran had halted its nuclear weapons programme in 2003, contradicting the US administration's previous view.
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