Oil dips to four-year low

Abu Dhabi/Dubai: The price of global benchmark crude on Gulf News fell to below $46 (Dh168.9) per barrel to its lowest in nearly four years, causing more concern among major producers about the commodity's sliding value.

Leading members of the Organisation of Petroleum Exporting Countries (Opec) with huge infrastructure projects to fund are worried about their shrinking export revenues.

With the prospects of global economic growth weakening, oil has shed about two-thirds of its value since July when it traded more than $147 per barrel.

In yesterday's early trading, US light crude for January delivery was down 57 cents to $46.22 a barrel. It earlier touched a low of $45.30, the lowest since February 9, 2005. London Brent crude was down 67 cents at $44.77.

Yesterday Iran said $75 a barrel was a fair price, echoing earlier comments by Saudi Arabia's King Abdullah Bin Abdul Aziz and Oil Minister Ali Al Nuaimi.

Iran also believes that the market is oversupplied and producers should cut output to balance the fundamentals of supply and demand.

"It is obvious that the market is oversupplied," Reuters quoted Iran's Opec governor Mohammad Ali Khatibi as saying.

Opec will announce a production cut at its meeting in Algeria later this month, Qatar's Energy Minister Abdullah Bin Hamad Al Attiyah told reporters in Dubai on Wed-nesday.

Industry analysts said the fall in oil price could harm the Gulf economies, but for now these countries are cushioned against lower crude prices because of the financial reserves they have accumulated from the previous high revenues.

"The oil producers sure are going to end the year 2008 with a pretty high average price for oil. But, if this crisis continues and the oil prices dip further, next year we are going to see some tightening of belts as far as the Middle East oil producing countries are concerned," said Kate Dourian, the Middle East editor of energy information provider Platts.

"Some of the countries in the region may be forced to dip into their reserve funds, particularly Iran, which appears to be in a tight spot. The markets currently are under a lot of pressure...credit is tight and there's more supply from non-Opec countries," Dourian added.

Abu Dhabi-based econ-omist Mohammad Amerah agreed, saying: "The price below $50 per barrel will have a negative impact on the UAE's oil revenue and in turn, that will affect investments in the oil and non-oil sectors."

However, several producers have budgeted for prices at around the current price levels. Opec secretary-general Abdullah Al Badri was quoted as saying that producers needed at least $70 to $80 a barrel or more for crude to meet their development needs.

Fallen too far

The price of oil has fallen too far in response to a decline in world demand for fuel, the head of the International Energy Agency (IEA) said on Thursday.

"Sometimes the market is overshooting upwards and downwards, and this time this is definitely happening downwards," Nobuo Tanaka, the IEA's executive director, said.