by Mark Shenk
(Bloomberg) – Crude oil fell after the U.S. economy expanded at a slower pace than anticipated in the third quarter and OPEC agreed to maintain production targets.

Oil slipped after the Commerce Department said that the gross domestic product grew 2.2 percent from July through September, down from a 2.8 percent gain previously reported. The Organization of Petroleum Exporting Countries will hold quotas at 24.845 million barrels a day.

“This was a significant revision,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “This should weigh on prices.”

Crude oil for February delivery dropped 70 cents, or 1 percent, to $73.02 a barrel at 10:53 a.m. on the New York Mercantile Exchange. Prices are up 64 percent this year.

The drop in prices accelerated as the dollar climbed to a three-month high against the euro after an industry report showed sales of existing homes rose last month more than economists estimated. The U.S. currency strengthened as much as 0.3 percent to $1.423 per euro, the highest since Sept. 4.

Home purchases increased 7.4 percent to a 6.54 million annual rate from a revised 6.09 million pace the prior month, the National Association of Realtors said today in Washington. It was the highest level since February 2007.

This was the fourth time this year that OPEC ministers met without revising production figures. Today’s meeting was held in Luanda, Angola.

Rising prices have encouraged some OPEC members to renege on their pledge in 2008 to reduce output by 4.2 million barrels a day. Members complied with 58 percent of cuts in November, down from 60 percent the previous month, according to International Energy Agency estimates.

Deteriorating Compliance

“No change in quotas was largely expected by the market,” said Kaha Kiknavelidze, a managing partner at London-based Rioni Capital Partners LLP, a hedge fund that specializes in emerging markets. “More important is compliance, which has deteriorated meaningfully. That puts pressure on prices.”

Prior to the meeting, ministers from member states including Saudi Arabia and Algeria said there was a consensus to keep quotas at current levels as they gathered for the closed- door discussions.

“OPEC has to get a bit more serious at either improving compliance or really holding the line and stopping this upward creep in production,” said Mike Wittner, head of oil research at Societe Generale SA in London. “OPEC’s strategy is if you combine recovering demand with flat OPEC production, you are going to get stock draws.”

Brent crude oil for February settlement declined 72 cents, or 1 percent, to $72.27 a barrel on the London-based ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

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