Crude Oil Falls After OPEC's Al-Naimi Says Market Is `Balanced'

By Alexander Kwiatkowski and Christian Schmollinger

Sept. 9 (Bloomberg) -- Crude oil fell in New York as Saudi Arabia's oil minister said supplies are sufficient to meet demand, raising speculation that OPEC will maintain production levels when it meets today.

The oil market is ``well balanced'' and inventories are ``healthy,'' Saudi Arabian Oil Minister Ali Al-Naimi said in Vienna when he arrived for today's meeting. Most analysts polled by Bloomberg expect the 13 members of the Organization of Petroleum Exporting Countries, which supplies more than 40 percent of the world's oil, to keep quotas unchanged and output near record levels.

``At the moment they are very satisfied with what is happening,'' said Eugen Weinberg, a commodity analyst at Commerzbank AG in Frankfurt. ``The oil price is still above $100. From what we have heard they will come short of cutting production.''

Crude oil for October delivery fell as much as $1.57, or 1.5 percent, to $104.77 a barrel and traded at $105.51 at 9:01 a.m. London time on the New York Mercantile Exchange. Oil has dropped 29 percent from the record $147.27 reached on July 11.

Oil also declined as Hurricane Ike weakened to Category 1 on the 5-step Saffir-Simpson scale of intensity. Sustained winds dropped to 80 miles (130 kilometers) per hour, the U.S. National Hurricane Center said on its Web site at 11 p.m. Miami time. Ike was moving to the west-northwest across southern Cuba at 13 mph and is forecast to enter the southeastern Gulf late tonight.

Output Disruption

The contract climbed as much as 3.5 percent yesterday as Ike delayed the restoration of Gulf of Mexico output that was closed because of Hurricane Gustav last week.

Apache Corp. started removing non-essential workers from platforms in the eastern Gulf yesterday because of Ike.

U.S. energy producers have resumed 21 percent of oil production and 36 percent of natural-gas output in the Gulf of Mexico after Hurricane Gustav.

Energy companies reported 15 rigs and 200 production platforms are evacuated, the Minerals Management Service said yesterday in a statement on its Web site. About 1 million barrels of daily oil production and 4.7 billion cubic feet of gas remain shut in.

The Gulf of Mexico accounts for 26 percent of U.S. oil production and 14 percent of natural-gas output. The Gulf produces 1.3 million barrels of oil and an estimated 7.4 billion cubic feet of gas a day, according to the agency, part of the U.S. Interior Department.

OPEC Meets

Brent crude oil for October settlement fell as much as $1.44, or 1.4 percent, to $102 a barrel on London's ICE Futures Europe exchange. It was at $102.60 a barrel at 9:02 a.m. local time.

The contract declined 65 cents, or 0.6 percent, to settle at $103.44 a barrel yesterday, the lowest since April 3.

OPEC will review production targets for the fourth quarter at a meeting tonight.

``The market is fairly well-balanced,'' al-Naimi said as he arrived at his hotel in Vienna. ``We have worked very hard since June's meeting to bring prices to where they are now.''

The group will keep production unchanged, according to 29 of 32 energy analysts surveyed by Bloomberg last week.

``The Saudis, Kuwaitis and others aren't so inclined'' to cut output, said John Vautrain, senior vice president at consultants Purvin & Gertz Inc. in Singapore during an interview with Bloomberg Television. ``They are ready to defend a price of around $80 but the higher price they don't think is very healthy.''

To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.netChristian Schmollinger in Singapore at christian.s@bloomberg.net.