Oil prices fell Friday after a week of market turmoil fueled by OPEC production cuts and a rise in U.S. inventories.
Oil traders say the upward price pressure eased at week's end with promises by Saudi Arabia to avert an oil shortage, and indications U.S. authorities will take steps to hold down gasoline prices.
Brent crude prices dropped from this week's closing high of $32.45 Tuesday to under $30.70 in late trading Friday.
President Bush met the Saudi Arabian ambassador to the United States, Prince Bandar bin Sultan, to discuss oil prices Thursday. The ambassador promised his country will not let an oil shortage damage the world economy. He said his government supports a price target of $25 a barrel.
He spoke following a decision by the Organization of Oil Exporting Countries to reduce production targets by one million barrels daily, beginning April 1. The cut was pushed by Saudi Arabia, the world's biggest oil producer.
But oil traders are shrugging off the OPEC move. An oil analyst at London's Commerzbank, Dave Thomas, is skeptical OPEC will stick to its quota.
"OPEC doesn't really have the incentive to decrease output in line with its new quota level while oil prices are still above the level of its basket range," he noted. "Thirty dollar Brent still being well above the $28 [per barrel] top of the OPEC basket range and, therefore, we are likely, in our view, to see the OPEC nations continue to overproduce and really it will be a question of waiting to see the inventory data and the production data over the coming weeks to give the market some direction about where oil prices are going."
Mr. Thomas says oil prices also softened on news that U.S. crude oil and gasoline inventories are on the rise.
In another development pushing the market, U.S. Energy Secretary Spencer Abraham said environmental authorities could give dispensation to three states from having to add an expensive anti-pollution ingredient to gasoline during this summer's peak driving season.
The statement follows criticism from opposition Democrats that President Bush has not done enough to hold down gasoline prices, which are near their historic high.