Oil prices slipped below $99 a barrel Tuesday amid expectations that OPEC will raise its production quota this week.
By early afternoon in Europe, benchmark crude for July delivery was down 47 cents at $98.54 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost $1.21 to settle at $99.01 on Monday.
Brent crude was down 3 cents to $114.45 a barrel on the ICE futures exchange in London.
Analysts are looking for clues on what the Organization of Petroleum Exporting Countries will do about oil production when the cartel meets Wednesday in Vienna.
OPEC ministers could decide to try to push oil prices lower by increasing production. Some OPEC officials have said that they believe prices are too high and threaten global economic recovery.
While Saudi Arabia, the world’s largest crude exporter, has said prices should be between $70 and $80 a barrel, others within OPEC, like Iran, Iraq and Venezuela would prefer a higher range.
Iraqi oil minister Abdul-Karim Elaibi said Tuesday that a price of between $100 and $120 a barrel is "reasonable."
Capital Economics said traders are speculating that OPEC will increase its output ceiling by as much as 1.5 million barrels per day. That would be the first increase since September 2007, but oil prices are likely to fall regardless of OPEC’s decision, it said.
The cartel’s current production is already close to 1.5 million barrels above the daily production ceiling so any increase of that magnitude would be largely symbolic, Capital Economics said.
"The bigger picture is that oil prices are likely to decline anyway as demand continues to disappoint and the Middle East risk premium fades," it said.
Also on the radar is the U.S. Energy Department’s release Tuesday of its monthly short-term energy outlook and weekly petroleum inventories report. The recent trend has been for rising supplies and falling demand.
Data for the week ending June 3 is expected to show a draw of 1.5 million barrels in crude oil stocks and a rise of 1.1 million barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
The American Petroleum Institute will release its report on oil stocks later Tuesday, while the report from the Energy Department’s Energy Information Administration – the market benchmark – will be out on Wednesday.
Oil gained some support from a weaker dollar, which makes crude cheaper for investors with other currencies and tends to lift prices. On Tuesday, the euro was up to $1.4666 from $1.4587 late Friday in New York.
In other Nymex trading in July contracts, heating oil was down 0.62 cent to $3.0112 per gallon and gasoline lost 0.57 cent to $2.9442 a gallon. Natural gas was up 0.7 cent at $4.834 per 1,000 cubic feet.