Oil rises to $47 as OPEC prepares output cut

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(Agencies)
Updated: 2008-12-15 16:46

SINGAPORE – Oil prices rose to above US$47 a barrel Monday in Asia as investors anticipated OPEC will announce a large production cut at its meeting this week.

A gasoline station attendant adds oil to a car engine at a service station in Manila, the Philippines. [Agencies]

Light, sweet crude for January delivery was up 92 cents to US$47.20 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract Friday fell US$1.70 to settle at US$46.28.

The Organization of Petroleum Exporting Countries (OPEC), which accounts for 40 percent of global supply, has signaled it plans to announce a substantial reduction of output quotas at its meeting Wednesday in Algeria.

Iranian Oil Minister Gholam Hossein Nozari was quoted Sunday on his ministry's website as saying that Iran would push for a production cut of 1.5 to 2 million barrels per day.

Analysts have questioned whether OPEC members will follow through with any announced cut.

"They're talking about a severe cut, but the question is their discipline," said Christoffer Moltke-Leth, head of sales trading at investment firm Saxo Capital Markets in Singapore. "Unless they really surprise the market, this cut may not support the price much."

Oil has jumped from a four-year low earlier this month of US$40.50 a barrel on expectations an OPEC output reduction could be the catalyst to stabilize the oil price, which has fallen 65 percent since July.

Investors largely ignored OPEC's 1.5 million barrels a day output cut in October, focusing instead on a slowing global economy that's hurt crude demand.

More bad macro-economic and company news from the US and Europe over the coming weeks will likely push oil prices lower, Moltke-Leth said.

"I expect crude to continue its slide and I don't think OPEC is going to prevent that, Moltke-Leth said. "Demand destruction in the major economies will still very much be on the agenda. We could go as low as US$30 a barrel."

In other Nymex trading, gasoline futures rose 1.73 cents to US$1.10. Heating oil gained 2.21 cents to US$1.52 a gallon while natural gas for January delivery jumped 13.3 cents to 5.62 per 1,000 cubic feet.

In London, January Brent crude rose 94 cents to US$47.35 on the ICE Futures exchange.