OWN CORRESPONDENT, Singapore | Monday
OIL prices have inched higher on the back of the world’s biggest consumer, the United States, being battered by cold temperatures and rumours of production cuts by the OPEC producers’ cartel early next year.
The market is beginning to ponder whether OPEC might move early to avoid any price collapse by reining in production when ministers gather for an extraordinary meeting in mid-January.
US light crude futures edged nine cents higher to $28.96 a barrel, marginally extending an 88-cent rise in New York on Friday when crude settled at $28.87.
US heating oil and natural gas both found support from the latest forecasts and headed higher, with gas up above $9.00 per million British thermal units, not far off all-time highs set last week at $9.86.
Despite the pre-weekend run up, crude remains about 18% off from levels in late November.
The sharp decline in less than one month has ignited fears within the Organisation of the Petroleum Exporting Countries that prices might come crashing lower once peak demand winter is over after the first quarter.
Several OPEC members already have begun to talk about possible output cuts when the cartel meets on January 17 in Vienna.
OPEC President Ali Rodriguez of Venezuela said last week that group output would be reduced if the price of OPEC’s reference basket of seven crudes fell below $22 a barrel.
Under an informal agreement earlier this year, OPEC targeted a $22 to $28 per barrel price band for its reference basket of seven crude grades.
If prices move out of the band for a specified time, OPEC has said it would increase or cut output by 500000 barrels per day (bpd) to bring prices back into its range.
Oil has spent much of 2000 above the upper limit of the target band despite four hikes this year in OPEC production by a total 3.7 million bpd.
But the latest slide since late November has pulled prices back into line with OPEC’s preferred range. OPEC’s crude basket was pegged last Thursday at $23.51 a barrel, the lowest point since May.
Indonesia, Asia’s sole OPEC member, has said it would propose a production cut in January, while Kuwait has said a cut of one million bpd was an option. – Reuters