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LONDON -- The price of U.S. light crude dropped 68 cents to $37.81 per barrel on Monday morning, more than 10 percent below last week's 21-year high of $42.45, according to Reuters.
Increased supplies in the United States and OPEC's promise to increase output precipitated the drop. However, price declines will be limited by security concerns in the Middle East and fears that the summer driving season will deplete U.S. supplies.
Prices began to drop last week after OPEC pledged to raise official output by 2 million barrels per day (bpd) starting in July and a further 500,000 bpd in August. Saudi Arabia and the United Arab Emirates said that they would pump an extra 1 million bpd between them, regardless of OPEC policy.
According to the latest weekly data, U.S. crude stocks are at their highest since August 2002, and gasoline stocks have increased, offering some relief for the summer driving season. However, stocks remain below five-year averages and are 4 million barrels below what they were last year.
Energy Secretary Spencer Abraham urged U.S. refineries to run at full capacity to ensure gasoline supplies. On Friday, after a meeting with suppliers, he announced,"I made it clear to them that we wanted to see no diminishment in refining capacity during this peak summertime period."
Security concerns in the Middle East are still a factor in oil prices. An Irish cameraman was killed and his British colleague was wounded by gunmen in Saudi Arabia on Sunday. The attack came a week after al-Qaeda militants killed 22 people in the eastern oil city of Khobar.