Traders said oil market sentiment was firm following the latest indication that OPEC was keeping a tight rein on crude production and that world oil demand was set to accelerate sharply.

The September US Light crude futures contract trading on the electronic ACCESS system in Asia was down seven cents per barrel at $21.20 at 0900 GMT.

In New York trading on Monday, the contract rose as high as $21.30 and ended the day at $21.27 -- the highest settlement since October 1997.

On the Singapore International Monetary Exchange (SIMEX), September Brent was down five cents at $20.45.

September Brent on London's International Petroleum Exchange (IPE) had closed at a 22-month high of $20.50, 44 cents higher than the previous day's close.

The International Energy Agency said earlier on Tuesday that OPEC's compliance with its production cuts was 91 per cent in July from 87 per cent in June.

That reinforced the view that OPEC discipline was being maintained after it decided to cut production sharply through until next March.

On Monday, Venezuelan energy and mines minister Ali Rodriguez said he did not expect any change in OPEC's production policy when the group meets next month.

The IEA's latest report said that while OPEC was implementing almost all of its stated cuts, the outlook for the cartel was rosy in 2000.

It said world demand was set to grow 1.8 million barrels per day to 77 million in 2000, double the 900,000 bpd in 1999.

But it said the call on OPEC crude would jump to 28.9 million bpd in 2000 compared with current output of just over 26 million bpd.

The US Energy Information Agency (EIA) had said on Friday that it was raising its forecasts for world oil prices for this year and next because of the better than expected compliance by OPEC to its pledged output cuts.

The EIA said world oil prices will average $18.39 in the third quarter of the year, rising to $18.67 in the final period of the year.

Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.