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Oil up ahead of Opec meeting as dollar slips
[LONDON] Oil prices rose on Tuesday in response to a weaker dollar and expectations that Opec producers will maintain their group production target at its current level and resist pressure for an increase.
The dollar fell against the euro and a basket of currencies, making oil cheaper for consumers in Europe and also for holders of other currencies.
Brent crude oil for July was up 40 cents at US$65.28 a barrel by 1030 GMT. US crude was up 60 cents at US$60.80 a barrel.
Ministers from the Organization of the Petroleum Exporting Countries (Opec), responsible for more than a third of the world's oil output, meet in Vienna on Friday to decide on production policy for the next six months.
The group has been producing up to 2 million barrels per day (bpd) more than needed this year, but analysts expect demand to pick up, helping to drain stocks and balance the market.
Saudi Arabia's oil minister, Ali al-Naimi, has said he expects oil demand to increase in the second half of this year while supply decreases, in a sign that the kingdom's strategy of defending market share was working.
"Demand is picking up. Good! Supply is slowing, right? That is a fact," Mr Naimi told reporters. "You can see that I'm not stressed, I'm happy."
Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt, noted that the Saudi oil minister had said it would take time for the oversupply to be reduced and for balance to be restored on the oil market. "A weaker US dollar is lending prices buoyancy, as are comments made by the Saudi Arabian Oil Minister," Mr Fritsch said.
Several banks and analysts, including Morgan Stanley, have suggested that Opec could raise its production target, acknowledging that it has been producing more than planned over the last few months.
But most investors expect no change in Opec's official target.
"Opec meets on Friday and is in no mood to cut output," said Amrita Sen, chief oil analyst at consultancy Energy Aspects. "The gulf between the member countries remains extremely wide, and without a contribution from everyone ... Saudi Arabia will not reduce production."
The contrasting views between Opec members are partly the result of differing extraction costs, with Saudi Arabia the driving force behind keeping output high in defence of market share, while Venezuela and Iran have favoured cuts to help to promote higher prices.