Oil Rises to $50 as OPEC’s El-Badri Says Sizable Cut Is Needed
By Nidaa Bakhsh
Dec. 15 (Bloomberg) -- Crude oil rose, touching $50 in New York, after OPEC’s Secretary-General Abdalla El-Badri said the group needs to make a “sizable” production cut at this week’s meeting in Algeria.
The Organization of Petroleum Exporting Countries, which pumps 42 percent of the world’s oil, will probably lower output targets by at least 2 million barrels a day, or 7.3 percent, at a Dec. 17 meeting in Oran, according to 18 of 33 analysts surveyed by Bloomberg. Oil gained 13 percent last week, its biggest five-day gain in four years, on speculation production cuts will revive prices.
Prices are being “buoyed by expectations that OPEC will make a significant cut,” Robert Laughlin, a senior broker at MF Global Ltd. in London, said by phone today. “The necessity for cuts has never been so vital.”
Crude oil for January delivery rose as much as $3.77, or 8.2 percent, to $50.05 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $49.78 at 1:54 p.m. London time. It’s the first time oil has traded above $50 a barrel since Dec. 2.
“Stocks are very high, we need to take action at this time,” El-Badri told reporters when he arrived at his hotel in Oran today. The oil market has 100 million barrels in excess stockpiles, he said.
Hedge-fund managers and other large speculators increased their net-long positions in New York crude-oil futures in the week ended Dec. 9, according to U.S. Commodity Futures Trading Commission data.
OPEC President Chakib Khelil said today all the group’s members support an oil production cut at this week’s meeting. Khelil, who is also Algeria’s oil minister, said he is confident Russia will act to support OPEC’s reduction.
Russia Cuts
OPEC is asking Russia, the largest producer outside the group, to cut oil output by between 200,000 and 300,000 barrels a day to help revive prices, OAO Lukoil Chief Executive Officer Vagit Alekperov said in Moscow today.
Oil has fallen more than $100 a barrel from July’s record as the global economic slump cuts fuel consumption. World oil demand will fall this year for the first time since 1983, the International Energy Agency said last week.
China’s November crude-oil processing fell to a 15-month low as an economic slowdown cut demand. Refineries processed 27.27 million tons of crude last month, or 6.64 million barrels a day, the lowest since September last year, the China Mainland Marketing Research Co. said in a faxed statement today.
“People were expecting Chinese demand increases to overcompensate for the demand slump in the OECD countries,” said Eugen Weinberg, a senior commodity analyst at Commerzbank AG in Frankfurt, Germany. “Right now it’s not looking like this.”
U.S., Japan
A report today will probably show industrial production in the U.S., the world’s largest oil consumer, contracted 0.9 percent last month as automakers cut output, according to a survey of economists. Sentiment among the largest manufacturers in Japan, the third-largest oil user, fell the most in 34 years, according to the nation’s quarterly Tankan survey today.
Brent oil for January settlement rose as much as $2.78, or 6 percent, to $49.19 a barrel on London’s ICE Futures Europe exchange. The contract expires tomorrow. The more actively traded February futures gained 4.5 percent to $51.31 a barrel at 1:10 p.m. London time.
Oil prices will fall further if OPEC nations don’t cut daily output by at least 1.5 million barrels at this week’s meeting, Iranian Oil Minister Gholamhossein Nozari said yesterday.
Speculative long positions, or bets prices will rise, outnumbered short positions by 10,807 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 8,558 contracts, or 381 percent, from a week earlier.
To contact the reporters on this story: Nidaa Bakhsh in London at nbakhsh@bloomberg.net
Last Updated: December 15, 2008 08:57 EST
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