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Oil drops below $99 ahead of OPEC meeting

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Oil prices dropped below $99 a barrel Wednesday amid worries about the eurozone’s debt crisis and expectations OPEC will keep its output quotas unchanged.

By early afternoon in Europe, benchmark crude for January delivery was down $1.70 to $98.44 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $2.37 to settle at $100.14 on Tuesday.

In London, Brent crude was down $1.51 to $107.99 on the ICE Futures exchange.

Concerns about the European debt crisis, coupled with indications that the economies using the euro were inching closer to recession, put pressure on the common currency, which fell below the noteworthy barrier of $1.30 in Wednesday trading.

The euro was down to $1.2987 from $1.3043 late Tuesday in New York as the dollar gained momentum as a safe haven. A stronger dollar usually pushes down oil prices by making crude more expensive for investors trading in other currencies.

“Europe might be falling into a recession but for the European consumer the price of crude oil in euros is now as expensive as in the peaks of 2008 or of the Libyan crisis,” said analyst Olivier Jakob of Petromatrix in Switzerland. “Oil demand in Europe in 2011 was very poor, but with the current prices we will not count on a demand revival for 2012.”

The Organization of Petroleum Exporting Countries is meeting Wednesday in Vienna amid a slowing global economy threatened by rising energy costs. The 12-nation group will also seek to avoid a supply glut as Libya’s oil exports gradually recover next year.

“The cartel will be treading a fine line between any decision that would further elevate prices and at the same time, making some attempt to accommodate a return of Libyan barrels into the market,” energy consultant Ritterbusch and Associates said in a report.

Comments from Iran’s oil minister that his Saudi counterpart had agreed not to up crude production to replace Iranian oil in case an international embargo on Iranian oil impacts Tehran’s ability to sell its petroleum helped keep a floor under prices.

A senior member of Minister Rostam Ghasemi’s delegation said OPEC oil ministers had agreed to keep present production at around 30 million barrels a day. He asked for anonymity because his information was confidential.

Crude producers should consider boosting output since demand is growing in developing countries and inventories are dropping in wealthy nations, said Fatih Birol, the chief economist for the International Energy Agency, in a speech Wednesday in Singapore.

“I’m sure OPEC knows much better than me what to do,” Birol said when asked if OPEC should raise output. “But seeing that oil prices are still high today and the negative effect that has on the recovery of the global economy, I hope the energy producing countries will take these things into account and make their decision accordingly.”

A report showed U.S. energy supplies were little changed last week. The American Petroleum Institute said late Tuesday that crude inventories rose 462,000 barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted a decrease of 2.0 million barrels.

Inventories of gasoline fell 12,000 barrels last week while distillates rose 1.2 million barrels, the API said.

The Energy Department’s Energy Information Administration reports its weekly supply data — the market benchmark — later Wednesday.

In other energy trading on the Nymex, natural gas fell 4.1 cents at $3.238 per 1,000 cubic feet. Heating oil fell 3.17 cents to $2.9871 a gallon and gasoline futures slid 2.76 cents to $2.5978 a gallon.

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Alex Kennedy in Singapore and George Jahn in Vienna contributed to this report.