AP: Crude oil prices advance as market speculates Opec will trim output
NEW YORK AND LOS ANGELES—Crude oil rose for a third day on signs that the Organization of Petroleum Exporting Countries (Opec) will reduce production to halt a 50 percent drop in prices since July.
Opec may decide to pare production by 1 million to 2 million barrels a day in stages at an October 24 meeting to stabilize prices, said Chakib Khelil, the group’s president.
Deutsche Bank AG cut its 2009 crude-oil price estimate by 35 percent to $60 a barrel, citing the possibility of a “major world recession.”
“The main reason for the rise is the impending Opec production cut,” said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. “It’s not a question of if, but of how much they will cut production at Friday’s meeting.”
Crude oil for November delivery rose $1.44, or 1.9 percent, to $75.69 a barrel in morning trading on Tuesday in Sydney on the New York Mercantile Exchange. On Monday, oil rose $2.40 to settle at $74.25 a barrel.
“Oil is following the equity markets higher,” Barakat said. “The fate of energy markets has been very closely tied to the Dow Jones Industrial Average lately.”
US stocks rose on Monday, adding to the Dow Jones Industrial Average’s best weekly gain in five years, after Halliburton Co.’s profit topped estimates and Federal Reserve chairman Ben S. Bernanke endorsed an economic stimulus package.
Opec, supplier of about 40 percent of the world’s oil, brought forward to this week a Vienna meeting planned for November to discuss output levels.
“Opec is the focus,” said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. “We are all waiting to see what Opec does on Friday. A 1 million or 1.5 million barrel cut looks most likely, but as much as 3 million barrels is a possibility, although done in stages.”
Goldman Sachs Group Inc. and Merrill Lynch & Co. said a 1 million barrel cut is possible. Oil may fall below $60 a barrel if Opec limits the cut to 1 million barrels a day, Goldman analysts said in a report dated October 17. Merrill analysts said Opec may trim supplies by 2.4 million barrels a day over 12 months if economic conditions deteriorate.
Opec’s 13 members produced 32.2 million barrels a day in September, according to a Bloomberg News survey of analysts and producers.
“The West is going to be angry because the drop in oil prices has been just about the only positive economic news,” Fitzpatrick said. “Falling gasoline prices have been a great help to consumers.”
