BLBG: Crude Oil Rises a Second Day as OPEC Is Poised to Reduce Output
By Nesa Subrahmaniyan and Gavin Evans
Oct. 20 (Bloomberg) -- Crude oil rose for a second day in New York on speculation OPEC will lower output in an attempt to halt a slide in prices, which have fallen more than 50 percent from July's record.
OPEC, supplier of about 40 percent of the world's oil, favors a cut and may pare output in stages to maintain stable prices as global growth weakens, said Chakib Khelil, the group's president. The Conference Board's index of leading U.S. indicators due today probably fell for a third time in September, according to a survey of economists.
``OPEC is just trying to pre-empt any sort of ongoing weakness in oil demand,'' Gavin Wendt, a senior resources analyst at Fat Prophets Funds Management in Sydney, said in an interview with Bloomberg Television. ``We're not going to see too much more downside in oil prices from here.''
Crude oil for November delivery gained as much as $1.34, or 1.9 percent, to $73.19 a barrel in electronic trading on the New York Mercantile Exchange. It traded at $72.99 at 10:27 a.m. in Singapore.
The contract rose $2, or 2.9 percent, to $71.85 on Oct. 17, its first gain in four days. Oil dropped 7.5 percent last week as slowing demand boosted fuel stockpiles. Prices tumbled to a 14-month low of $68.57 a barrel on Oct. 16.
China's economy grew 9 percent in the third quarter, the slowest pace in five years, underscoring concern that the spreading financial crisis threatens the biggest contributor to global growth.
The median estimate of 12 economists surveyed by Bloomberg News was for a 9.7 percent expansion, after a 10.1 percent gain in the previous three months. The statistics bureau released the data in Beijing today.
`Significant Cut'
The Organization of Petroleum Exporting Countries brought forward to Oct. 24 a meeting planned for November to discuss output levels. Members of the group will meet in Vienna.
While there is a consensus among the group's members to cut output, there's no agreement on the size of the reduction, and that could range between 1 million and 2 million barrels a day, Khelil, the group's president said in an interview on Algerian television yesterday.
``This may be OPEC's toughest balancing act in its history,'' said Tetsu Emori, the fund manager at Astmax Co. in Tokyo, Japan's biggest commodities asset manager with $200 million under management. ``By the time OPEC announces a cut, they would be hoping to have seen the bottom of the price.''
Goldman Sachs Group Inc. and Merrill Lynch & Co. analysts say crude, which fell more than 50 percent from a record $147.27 a barrel in July to a 14-month low last week, may drop another 44 percent should the world economy slip into a recession.
U.S. Stockpiles
An OPEC reduction of 2 million barrels a day ``would be a significant cut,'' Fat Prophets' Wendt said.
OPEC's 13 members produced 32.2 million barrels a day in September, according to a survey of analysts and producers.
Brent crude oil for December settlement rose as much as $1.05, or 1.5 percent, to $70.65 a barrel on London's ICE Futures Europe exchange, and traded at $70.54 at 10:27 a.m. Singapore time.
Stockpiles in the U.S., the world's largest consumer, increased 6 percent in the three weeks ended Oct. 10 as fuel use slowed. Daily gasoline demand, based on deliveries from refineries and terminals, fell to a three-year low of 8.69 million barrels in the week ended Oct. 3,
Markets have been driven more by fear and panic than ``rational, considered'' analysis in recent months and global demand for oil products is still increasing faster than new production is being developed, Fat Prophets' Wendt said.
Prices need to stabilize at about $80 a barrel to justify continued investment in exploration and development, he said.
Options contracts to sell oil at $50 by December soared 28- fold in the past two weeks on the New York Mercantile Exchange.
Options contracts that allow holders to sell 1,000 barrels of oil for $50 each by December closed at $280 on the Nymex on Oct. 17, up from $10 on Oct. 3.
To contact the reporters on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net; Gavin Evans in Wellington at gavinevans@bloomberg.net
