Oil prices drop despite output cuts

World oil prices dropped on Monday as eurozone debt concerns offset production stoppages in the Gulf of Mexico and Norway. New York's main contract, light sweet crude for delivery in August, slid $1.11 to $78.65 a barrel. Brent North Sea crude for August dropped 63 cents to $90.35 in late London deals. Prices had risen slightly in Asian trading hours as the onset of Tropical Storm Debby forced oil and gas operators in the Gulf of Mexico to evacuate some platforms and rigs. "The oil market started the week on the negative territory... tracking losses in the global equity markets," said Sucden Financial Research analyst Myrto Sokou. "The market sentiment has been hurt amid renewed concerns about the uncertain economic conditions in the eurozone ahead of the crucial European Union summit meeting on Thursday and Friday." Traders were also tracking events in Mexico. "Over the weekend we see that the Gulf of Mexico has been affected by the storm and production has been disrupted," Ker Chung Yang, commodity analyst for Phillip Futures in Singapore, told AFP. "They shut the rigs in the Gulf of Mexico, so I think this is one of the key reasons that is supporting the oil prices at the moment." Oil production in the Gulf of Mexico constitutes 20 percent of US output, and any disruption in the area would have ramifications on crude prices as the US is the world's largest oil consumer. Meanwhile strike action on Sunday by hundreds of energy-sector workers in Norway impacted crude output in Europe's main oil producer. Elsewhere, the European Union on Monday said that a ban on oil imports from Iran would go ahead as planned on July 1 owing to a lack of progress in talks on Tehran's contested nuclear drive. A statement from EU foreign ministers on the proposed embargo said: "Following a review of the measures the council confirmed that they would remain as approved in January." After weeks of fraught talks on an embargo that may hurt debt-straddled EU nations such as Greece, the 27-nation bloc agreed on January 23 to immediately ban new oil imports from Iran and phase out existing contracts by July 1. Confirmation that the embargo would be enforced comes days after talks in Moscow between Iran and world powers on its nuclear programme failed to reach a breakthrough. Negotiators from permanent UN Security Council members Britain, China, France, Russia and the United States, plus Germany, last week agreed with their Iranian counterparts to stage a new expert-level meeting in Istanbul on July 3. The West suspects Iran of seeking to make nuclear weapons under the guise of an energy programme and wants it to stop enriching uranium to 20 percent, which brings it dangerously close to levels needed to make a nuclear bomb.