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The price of oil was stuck at 11-week lows in early trading in London yesterday with many speculators apparently losing interest in betting on a US-led war on Iraq, analysts said.
Signs that the Organisation of Petroleum Exporting Countries (OPEC) oil cartel is leaking oil onto the market in excess of its official quotas was also weighing on the market, they added.
The price of reference Brent North Sea crude oil was steady at $25.45 a barrel by midday, against $25.46 at the end of trading on Friday - the lowest closing level since August 9th.
In New York, the benchmark light sweet crude December contract slumped $1.15 to $27.05 a barrel on Friday, also the lowest close since August 9th.
Commerzbank oil analyst Mr Steve Turner said the fall had been driven by speculation over the likelihood of a war on Iraq rather than fundamental factors.
"A war still looks as likely as it has done for some time but the speculators seem unwilling to continue to bet on a higher oil price," he said.
"It's going to be interesting to see now how things move while the UN Security Council is having this debate this week because there is still a distinct possibility that the US will go it alone even if the UN can't agree a resolution," he added.
Until the recent slide, analysts said the prospect of a US invasion of Iraq had added several dollars to the price of a barrel of oil amid concern that such action could disrupt Middle East oil supplies, although most experts believe any stoppages would be minor.
Prices began to fall back last week amid signs that the UN Security Council was nearing a compromise resolution that would tone down the threat of automatic use of military force.
The market has continued to lose ground despite signs of tension within the council and indications that the United States is growing impatient with the progress of the council. The 15 members of the UN Security Council were to meet with chief weapons inspector Mr Hans Blix yesterday, opening a crucial week for US plans to disarm Iraq.
Adding to the negative tone of the market, the Middle East economic survey reported yesterday that the OPEC oil cartel produced 2.67 million barrels per day (bpd), or 12.3 per cent, over quota agreements in September.
Production by the 10 member-states, minus Iraq, rose by 610,000 bpd last month to 24.370 million bpd, the industry newsletter said.
Total OPEC production, including Iraq, rose 930,000 bpd to 26.19 million bpd from 25.26 million in August. Baghdad exports rebounded sharply, driven by an end to a surcharge.
OPEC has rebuffed calls from consumer countries for an increase in its official output ceiling but analysts point to loose quota compliance as a sign that OPEC member countries have nevertheless raised production informally.
