RTRS: Oil rises 2 percent as OPEC weighs supply cut
By Gene Ramos
NEW YORK (Reuters) - Oil prices rose on Thursday on expectations that OPEC will cut output at an emergency meeting Friday, after slowing demand and the growing financial crisis sent prices crashing from record highs above $147 a barrel.
Members of the Organization of Petroleum Exporting Countries gathering in Vienna ahead of their Friday meeting pointed toward a supply cut, with Iran suggesting a reduction of 2 million barrels per day cut and Qatar proposing a cut of at least 1 million bpd. [nLN132075]
Analysts polled by Reuters expected the cartel to reduce output by 1 million to 1.5 million bpd. [nLN716786] Top exporter Saudi Arabia has said only that the oil price would be determined by the market.
U.S. crude rose $1.51 to $68.26 a barrel by 12:50 p.m. EDT. London Brent crude gained $1.92 to to $66.44 a barrel.
The slumping global economy has damped oil demand in large consumer nations, such as the United States, helping push prices down from the record $147.27 a barrel struck in July.
U.S. crude fell on Wednesday to its lowest level in 16 months and settled 7 percent lower after U.S. data showed crude and product inventories swelling due to weaker demand.
The sharp drop came amid a broader sell-off on global markets rattled by fear that economies were heading into recession.
"Right now, crude futures are moving with the stock market,
although, obviously, people are expecting OPEC's meeting to decide on a production cut," said Phil Flynn, an analyst at Alaron Trading.
Bleak outlooks from world carmakers and a barrage of job cuts by major U.S. companies, including Chrysler and Xerox, deepened fears of an extended global recession and kept market nerves on edge on Thursday.
U.S. stocks, however, clawed back from 5-year lows in choppy action as investors sought bargains after the market's latest plunge.
PRODUCTION CUTS
OPEC President Chakib Khelil of Algeria said the producer group could consider cutting back output in several steps.
"I think that is a solution not to be excluded," Khelil told reporters. He also did not rule out the possibility the group could also cut back production with immediate effect.
"I think we will have both solutions," Khelil said.
Khelil said he favored OPEC's reference crude oil basket price at $90 to ensure energy projects go ahead. The basket price stood at $60.82 on Wednesday.
Some analysts, however, pointed out that the slowing global economy could limit the impact from any oil supply cuts OPEC might agree on to prop up prices.
Total oil product demand in the United States, the world's top oil consumer, fell 8.5 percent in the past four weeks from a year earlier, according to data released on Wednesday.
"It illustrates the immense size of the demand 'hole' OPEC has to dig itself out of, if it is to successfully recalibrate supply with the new demand parameters," MF Global said.
(Additional reporting by Fayen Wong in Perth and Ikuko Kao in London; Editing by Walter Bagley)
