Oil prices fall before OPEC supply decision

updated 8:32 a.m. ET Dec. 22, 2009

NEW YORK - Oil prices retreated to near $73 a barrel Tuesday as OPEC ministers indicated they would leave crude production levels unchanged while seeking to ensure compliance with members' output quotas. Gains by the dollar also helped push down oil prices.

By early afternoon in Europe, benchmark crude for February delivery was down 46 cents to $73.26 in electronic trading on the New York Mercantile Exchange. The contract fell 70 cents to settle at $73.72 on Monday.

The January contract, which expired Monday, ended down 89 cents at $72.47.

The 12-member Organization of Petroleum Exporting Countries, which accounts for about 35 percent of global crude supply, will likely keep its production quotas unchanged, several of the cartel's leaders said.

Oil ministers from Angola, Algeria, the United Arab Emirates and Libya all said Tuesday the group had decided to hold steady its production quotas, wary of taking a step that could shock the market and undercut the ongoing fragile global economic recovery.

Shukri Ghanem, the head of Libya's National Oil Corp. and that country's de facto oil minister, said there would be "no change" with quotas.

Investors were looking for signs OPEC plans to boost compliance with existing output levels. As the price of oil has more than doubled from a year ago, some OPEC members have increasingly exceeded their quotas, analysts say.

"A 'no change' as far as production quotas are concerned appears virtually assured," Galena, Illinois-based Ritterbusch and Associates said in a report. "However, comments from the various oil ministers and language within the communique are likely to suggest a strong effort toward increased compliance."

Other analysts said, however, that such appeals rang hollow, as producer countries try to capitalize on higher crude prices.

"OPEC will probably call for greater compliance to quotas, but this will be as credible as China calling for lower carbon emissions," said Olivier Jakob of Petromatrix in Switzerland.

The dollar's gains against other major currencies also helped keep a lid on oil prices by making crude priced in dollars more expensive for investors holding other moneys.

On Tuesday, the euro was down to $1.4285 from $1.4329 late Monday in New York, while the British fell to $1.6021 from $1.6052 and the dollar crept up to 91.31 Japanese yen from 91.15 yen.

In other Nymex trading in January contracts, heating oil was down 1.17 cents to $1.9335 while gasoline rose 0.46 cent to $1.8737. Natural gas was up 2.1 cents to $5.690 per 1,000 cubic feet.

In London, Brent crude for February delivery fell 39 cents to $72.60 on the ICE Futures exchange.

Also in msnbc.com business Your Career: The repercussions of expressing your faith Interactive: 10 cars we’re looking forward to in 2010 ConsumerMan: Gift of giving takes on whole new meaning ‘Reaching out’ and the other worst buzzwords of the year   Video: Shoppers and shippers in a race to the finish

MORE FROM OIL & ENERGY

Oil & Energy Section Front

Oil prices fall before OPEC supply decision OPEC unlikely to change production targets Cost of gas falls nearly 4 cents in last two weeks Exxon Mobil to buy XTO Energy for $31 billion Iraq hails oil auction but risky sites shunned Iraq opens big slice of oil riches to bidders Saudi oil minister says oil is at ‘perfect’ price Newsweek: New market bubble is brewing Chevron 3Q profit slumps 51 percent BusinessWeek: The coming energy revolution Oil & Energy Section Front   Add Oil & Energy headlines to your news reader: