BLBG: Oil Little Changed as OPEC Cut May Better Match Supply, Demand
By Angela Macdonald-Smith
Oct. 27 (Bloomberg) -- Crude oil was little changed in New York near a 16-month low amid expectations that OPEC's decision to cut production will start to bring supply back in line with demand that is being curbed by the global financial crisis.
The 13 members of the Organization of Petroleum Exporting Countries agreed Oct. 24 to lower supply by 1.5 million barrels a day starting in November. The group is likely to reduce production further if the latest cut doesn't stabilize prices, Agence France-Presse said, citing an interview Iran's OPEC representative Mohammad Ali Khatibi gave on state television.
``The sentiment is negative at the moment so you can't rule out further declines,'' said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney. ``OPEC has actually taken a fairly significant step towards tightening the balance between supply and demand. Over time, that may prove somewhat supportive to the oil price.''
Crude oil for December delivery was at $63.93 a barrel down 22 cents, in after-hours electronic trading on the New York Mercantile Exchange 7:43 a.m. in Singapore. The contract earlier traded as high as $64.96.
On Oct. 24, the front-month contract fell $3.69, or 5.4 percent, to $64.15, the lowest close since May 31, 2007. Futures are down 31 percent from a year ago. The front-month contract dropped 11 percent last week, the fourth straight weekly decline.
Brent crude oil for December settlement on Oct. 24 declined $3.87, or 5.9 percent, to $62.05 a barrel on London's ICE Futures Europe exchange, the lowest settlement price since March 21, 2007.
Declining Demand
Global oil demand may decline for the first time in 15 years in 2008 and stagnate next year, the Centre for Global Energy Studies said Oct. 20. OPEC, the International Energy Agency and U.S. Energy Department all cut their forecasts for growth earlier this month.
``There have been fairly dramatic adjustments to consumption,'' Commonwealth's Moore said.
Prices have dropped 56 percent from the record $147.27 a barrel reached on July 11 as stock markets declined.
Eleven of 27 analysts surveyed last week by Bloomberg News, or 41 percent, tipped a decline in prices through Oct. 31. Eight respondents, or 30 percent, said oil will rise and eight forecast little change.
Oil options contracts to sell crude at $50 by December almost tripled on Oct. 24 after the OPEC decision to slash production failed to allay concerns that the global economic slump is hurting demand.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
