OPEC cuts discounts to US and Europe

Even though the prices at which crude oil has been trading recently in New York and London have gone nearly unchanged recently, the cost of Middle East oil to US and European refiners and traders went up to its highest level in a year last week as several OPEC members, led by Saudi Arabia, cut futures price discounts to buyers there in half last week.

The cut in discounts comes even as OPEC has promised to address the problem of the high cost of oil at its meeting scheduled for Vienna on Wednesday. The impact of the price increases brought about by the cut in discounts, which has taken the cost of a barrel of Middle East oil from $37 last October to a current price of $50 per barrel, is being especially felt in Europe due to the decrease in value of the euro.

Some OPEC members as well as some analysts are justifying the cut in discounts by citing the rise in fuel oil prices and also the recent rises in the level of crude oil inventories in the US, Europe, and Asia. OPEC sees these high inventories as a threat to its control of the markets.