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Oil prices fell US$1 on Monday as mild weather in the United States kept a lid on heating demand and dealers continued to doubt Opec's ability to deliver on its agreed crude production cut.
"There are growing concerns about the lack of Opec compliance," said Bill O'Grady, analyst at A.G. Edwards. "If Opec isn't cutting back as much as it says it is, it will be hard for prices to stay afloat."
US crude was down 79 cents a barrel at US$58.80 by 1755 GMT, after falling as low as US$58.25, while London Brent crude was 51 cents lower at US$59.20.
Top world exporter Saudi Arabia is planning to enforce its Opec oil cut in full until the end of the year, sources said Monday, but analysts anticipated that some other Opec members would not adhere to their output limits.
The Organisation of Petroleum Exporting Countries agreed last month to cut production by 1.2 million barrels per day from Nov. 1, but the US government said last week it was expecting Opec to fall well short of that cut, reducing output by only 745,000 bpd this month due to overproduction by Iran and Venezuela.
Oil markets took a hit late last week after the International Energy Agency reported a large increase in inventories in the world's biggest consuming nations, and forecast reduced demand for Opec oil.
The IEA, which represents the interests of consumer countries, said stockpiles in leading industrialized nations filled at a rate of 1.15 million bpd, the biggest third-quarter rise since 1991, due to a slowdown in demand growth.
But it also said markets would tighten more than expected in the fourth quarter as winter demand rebounds.
Oil prices are 25 per cent below their peak hit in July.
Dealers said Monday that, until cold winter weather hits the United States, consumption rates may continue to be slow.
"We're treading water ahead of the winter," said Jason Schenker, an economist at Wachovia Bank. "Inventories look good, and it is pretty warm."
US heating demand was expected to be about 16 per cent below normal this week, the second straight week of below normal weather-related energy demand, according to the National Weather Service.
Data from the US Energy Information Administration on Wednesday will provide the next indication of the health of US stockpiles.
- REUTERS
