Crude Oil Rises as OPEC Prepares to Make Record Production...

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    Crude Oil Rises as OPEC Prepares to Make Record Production Cut.

    By Alexander Kwiatkowski

    Dec. 17 (Bloomberg) -- Crude oil rose after Saudi Arabia said OPEC will make a record production cut to reverse the five- month, $100 slump in prices.

    The group will trim production by 2 million barrels a day at the beginning of next year, Saudi Arabian Oil Minister Ali al-Naimi said today. Russia and Azerbaijan said they may join OPEC to reduce supply as recession cuts global energy consumption next year. Commodities also gained as the dollar fell to a 13-year low against the yen.

    “It certainly will help, and has helped, the crude price,” Kevin Norrish, a commodity analyst at Barclays Capital in London, said in a phone interview. “It is setting up the risk of over-tightening and quite a significant rebound in prices in the second half of next year.”

    Crude oil for January delivery climbed as much as $1.90, or 4.4 percent, to $45.50 a barrel on the New York Mercantile Exchange, the first increase in four days. The contract traded at $45.17 at 10:56 a.m. London time.

    Prices have tumbled 70 percent from a record $147.27 on July 11 as the global economy crisis tips oil consuming countries into recession. Global demand will fall for the first time since 1983 next year, the International Energy Agency said.

    The Organization of Petroleum Exporting Countries’ rate of compliance with a previous output cut is more than 85 percent, al-Naimi told reporters today in Oran, Algeria, before a ministerial meeting that will decide production quotas.

    Russia Collaborates

    Russia, the largest non-OPEC producer cut oil production 350,000 barrels a day in November and may trim output further in collaboration with OPEC as market conditions require, Deputy Prime Minister Igor Sechin said at the meeting. Azerbaijan is willing to contribute a supply cut of as much as 300,000 barrels a day, Azeri Energy Minister Natig Aliyev said in Oran.

    “OPEC appears to be caught in a ‘Catch-22’ situation,” Harry Tchilinguirian, a senior oil market analyst at BNP Paribas SA in London wrote in a report. “An attempt to aggressively boost prices, by pursuing a larger-than-expected cut, could backfire by turning sentiment even more pessimistic on the economy.”

    U.S. crude-oil and fuel supplies have climbed as the recession crimps demand.

    Crude inventories probably rose 600,000 barrels last week, according to the median of 11 responses in a Bloomberg News survey conducted before an Energy Department report today. The report will probably show that stockpiles of gasoline and distillate fuel, a category that includes heating oil and diesel, also increased.

    Brent crude oil for February settlement rose as much as $2.25, or 4.8 percent, to $48.90 a barrel on London’s ICE Futures Europe exchange, and traded at $48.46 a barrel at 10:57 a.m. local time. The January contract expired yesterday, after declining 4 cents to $44.56 a barrel.

    To contact the reporter on this story: Alexander Kwiatkowski in London at [email protected]
    Last Updated: December 17, 2008 06:00 EST
 
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