Dubai: The decline in Opec's oil below $100 a barrel for the first time since February is raising the likelihood the group will cut output, as Libya revives output and the global economic recovery falters.
The Opec basket of crudes fell to $98.59 yesterday, down 18 per cent from its highest level this year and within 2 percentage points of the 20 per cent drop that's deemed a bear market. Brent oil tumbled 21 per cent from its April high and New York crude 34 per cent.
Oil is sliding as the US, the world's biggest energy consumer, shows signs it's headed for a recession and Europe's debt crisis deepens just as Total and Eni resume Libyan production. Opec, which supplies 40 per cent of the world's oil, will reduce output to prevent Brent falling below $90 because Middle East members are increasing spending, according to Barclays and Deutsche Bank. Saudi Arabia, Opec's biggest member, boosted output five straight months this year.
"Saudi Arabia stepped up production to help compensate for the loss of Libya, and they will probably calibrate and go the other direction as production comes back," Daniel Yergin, co-founder of IHS Cambridge Energy Research Associates, said in an interview in New York. "The impact of Libya will be determined by what's happening in the overall global economy."
