Oil Prices Fall One Percent
— SINGAPORE (Reuters) - Oil prices fell one percent on Tuesday after Mexico said it would increase crude exports, while traders speculated that outside mediation might bring an end to the 44-day strike in Venezuela and free up more supplies.
U.S. light crude dropped 33 cents to $31.93 a barrel, retracing half of Monday's 58-cent gain in New York. Crude is still within $2 of the two-year peak at $33.65 struck at the end of December.
"Today's move is on a combination of factors including the Mexican increase, a lot of talk of an end to the Venezuelan strike in a few days and some profit-taking," said a London-based broker.
Mexico said on Monday that it would increase its crude exports by 120,000 barrels per day to 1.88 million bpd following OPEC's weekend decision to raise production by seven percent to make up for the shortfall in Venezuelan oil supplies.
Venezuela's oil output dropped two-thirds in December to just over one million bpd, Energy Minister Rafael Ramirez said on Monday.
The loss in exports has been most sorely felt in the United States, which takes 13 percent of its oil imports from Venezuela.
U.S. fuel stocks fell by a big nine million barrels two weeks ago as the strike choked off an essential supply line into the world's biggest oil consumer. There was little impact last week on inventories, which are hovering close to 26-year lows.
Traders will be keenly awaiting Wednesday's industry data to see if supplies in the United States have declined further.
Oil's reaction to OPEC's agreement on Sunday has been tepid, with traders questioning whether the output hike was too little, too late given the four-to-six-week sailing time from the Middle East to the United States. Venezuelan supplies take five days to hit U.S. shores.
The Organization of the Petroleum Exporting Countries will increase production by 1.5 million bpd on February 1 to 24 million bpd.
The cartel said at the weekend that it would meet again if Venezuelan oil exports were fully restored.
The London-based broker said traders were speculating that mediation by U.N. Secretary-General Kofi Annan and the United States may help break the deadlock between Venezuelan President Hugo Chavez and opposition leaders, who have kept the nationwide strike going since December 2.