Oil prices are falling back to levels not seen since the end of October, sharply reducing the risk of oil hitting $100 a barrel.

Prices slipped below $87 a barrel yesterday as increasing stocks of oil in the United States supported Opec’s decision not to raise output this winter. US crude futures later rose slightly, edging up 48 cents to $87.97 yesterday afternoon. US oil prices have fallen more than 12 per cent below the record of $99.29 on November 21. London Brent crude gained 28 cents to $88.77.

Although the cost of oil is coming down, the effect is unlikely to be noticed at the petrol pump for weeks to come; after their rise past the psychologically symbolic £1 a litre, the AA is doubtful that petrol prices will fall back below that level without a major price correction in the oil market.

An AA spokesman said: “There was some pent-up increase prior to the £1-a-litre breach that didn’t get passed on. This means that commensurate reductions are less likely. Anything around $90 a barrel is still in record territory.”

Oil initially surged more than $2 on Wednesday as Opec, which controls more than a third of world supply, rejected calls from consumer countries to boost oil output and that it would not revisit its decision until February.

Opec rejected a proposal to lift production by 500,000 barrels a day from the cartel’s output of 27.25 million barrels a day. The producers argued that the global market for crude oil was “well supplied”.

US crude stockpiles fell to their lowest in more than two years last week as fog disrupted imports. However, stocks rose again at the Cushing, Oklahoma, delivery point for US crude futures, while inventories of refined fuels rose by much more than expected. Stocks of distillate fuels, which include diesel, rose by 1.4 million barrels, although a decline had been expected, and gasoline inventories rose 4 million barrels.

Rising stocks have raised a question of whether the credit crunch is finally having an impact on economic growth in the United States and leading to a slowdown in oil demand. Jim Ritterbusch, president of Ritterbusch and Associates, said. “In my opinion, we are already in a recession, and you can see this in the demand for gasoline.”

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