Oil prices ease as Saudi hints at more production

Oil prices eased Monday after Saudi Arabia — the world's biggest crude producer — hinted it might raise output.

Benchmark crude for March delivery lost $1.21 at $87.90 US per barrel in midday trading on the New York Mercantile Exchange.

It had dropped as low as $87.40 earlier. The price of oil has fallen about three per cent since Thursday, when it traded near $92 US a barrel.

The Saudi oil minister, Ali al-Naimi, said he expected world demand will increase this year to between 1.5 million and 1.8 million barrels per day.

JP Morgan analysts said al-Naimi's prediction of stronger demand probably means the Saudis are willing to raise production.

"It would seem more oil is on the way, which will reduce the supply deficit and will moderate the price gain," the bank said in a note to clients.

Michael Lynch, president of Strategic Energy & Economic Research, said al-Naimi's comments imply that he thinks oil prices are too high, and the Organization of the Petroleum Exporting Countries would take steps to bring them down.

"I think that's the first serious comment along those lines from anybody in OPEC," Lynch said. "He seems to be saying maybe the market needs more oil."

The average price for gasoline in Canada on Monday was 112.59 cents a litre, according to Gasbuddy.com, a website that tallies pump prices reported by motorists across Canada and the United States. A year ago, it was just over $1.01.

From CBC News