Oil rose on Monday, supported by expectations Opec may cut output this week to boost prices that have fallen more than 50% in just three months from a
record high above $147 a barrel.
US crude for November delivery was up $1,75 at $73,60 a barrel by 9.25am GMT. The contract settled $2 higher on Friday at $71,85. London Brent crude rose $1,47 to $71,07 a barrel.
”The Opec news over the weekend was supportive but I think the market is still cautious given the barrage of bearish developments last week,” said Toby Hassall, chief analyst at Commodity Warrants Australia.
”Also, Opec may not want prices too high because if they push prices too much, that could be a factor that makes a possible recession worse.”
Several Opec member countries have called for an output cut, including Iran, Qatar and also Chekib Khelil, president of the Organisation of Petroleum Exporting Countries.
But others in Opec are concerned a big reduction could send the wrong signal to financial markets, which are still trying to find stability after the shocks of the credit crisis.
Acceptable price
”If there is a need to cut 500 000 barrels per day or one million barrels per day of the organisation’s production or not … the decision should be presented in a way that gives confidence to the market and the world and does not give a negative impact,” al-Hayat, a Saudi-owned Arab language newspaper said, quoting an Opec source.
Several members of the producer group also said over the weekend that an acceptable price for oil should be between $70 and $90 a barrel.
But a global economic slowdown could lessen the impact of any Opec cuts to defend prices.
”We expect energy and industrial metals prices will be the major casualties in this environment,” Deutsche Bank said in a research note.
”We expect the oil price to fall to $50 a barrel by the end of next year,” it said. ”History would suggest that Opec will struggle to defend oil prices in an environment where world GDP growth falls below 2%, as occurred in 1998 and 2001.”
Oil, which hit a record high of over $147 a barrel in
mid-July, touched a 16-month low of $68,57 last week, pressured by falls in demand in top energy consumer the United States and other industrialised countries.
Parts of the United States, struggling with high jobless
rates, seem to be already in recession, President George Bush’s top economic advisor said on Sunday.
A key question is whether demand from China, which helped drive oil’s six-year advance, will fall sharply.
China’s economic growth slowed to 9% in the third quarter, down from 10,1% in the second, providing
evidence the country cannot decouple from the struggling global economy. – Reuters