Oil prices drop before crucial OPEC meeting

New York's main contract, light sweet crude for delivery in July, sank 78 cents to US$99.44 per barrel.

Brent North Sea crude for July weakened by 87 cents to US$114.97 in late morning deals.

The market had fallen sharply on Friday after publication of dismal U.S. jobs figures for May but recovered by the end of the day for a modest loss.

“Brent is trading this morning at US$115 a barrel while WTI is just under US$100. Disappointing U.S. labor market data therefore knocked prices only briefly,” said analyst Carsten Fritsch at Commerzbank.

“The weak U.S. figures should increase the pressure on OPEC to raise production quotas at its meeting in Vienna on Wednesday, though.

“The International Energy Agency again urged OPEC on Friday to increase its oil production. OPEC itself is divided on this issue,” he said.

The 12-nation Organization of the Petroleum Exporting Countries (OPEC) will meet Wednesday in Vienna amid growing fears that high prices could further dent faltering world economic growth and energy demand.

“The debate about a possible quota increase should weigh on prices ahead of the OPEC meeting,” Fritsch said.

“Speculative financial investors appear to be calculating more on the possibility of an increase of production quotas.”

The IEA wants OPEC to increase output and prevent another damaging spike in prices, with seasonal demand set to strengthen in the coming months as the northern hemisphere enters summer.

So far this year, Brent oil prices have soared by about 21 percent, largely as a result of spreading unrest in the crude-producing Middle East and North Africa region — and particularly in OPEC member Libya.

At the same time, downbeat global economic data has suggested that the recovery is struggling and this complicates the outlook.

The U.S. economy generated a paltry 54,000 new jobs in May, one-quarter of the pace for the previous four months, sparking fresh worries it faces an extended period of slow growth and lower oil consumption.

“I would expect OPEC to leave quotas unchanged, rather than raise them, given the growing evidence that global demand is slowing,” said Capital Economics analyst Julian Jessop.

“There is speculation in the market that they will be doing something to acknowledge the supply problems in Libya.”

The oil cartel, which pumps 40 percent of the world's crude, has left its production target at 24.84 million barrels per day since early 2009.

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