BLBG: Oil Rises for a Second Day as Interest Rate Cuts to Spur Growth
By Jane Lee and Gavin Evans
Nov. 3 (Bloomberg) -- Crude oil rose in New York on signs fuel demand will increase after the U.S., India and China cut interest rates to prop up economic growth and amid speculation OPEC will cut output for a second time by year end.
Oil climbed 5.7 percent last week in the first gain in five weeks. India on Nov. 1 lowered its benchmark repurchase rate for the second time in two weeks, following The People's Bank of China, which cut its key rate on Oct. 29. OPEC is due to meet in Algeria on Dec. 17.
``Most market participants expect that oil supplies will tighten up in the months ahead,'' said Victor Shum, senior principal at energy consultant Purvin & Gertz Inc. in Singapore. ``OPEC has talked about a second production cut and is now trying to convince non-OPEC countries including Russia to join in the action.''
Crude oil for December delivery gained as much as $1.38, or 2 percent, to $69.19 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $68.60 a barrel at 3:28 p.m. Singapore time, bringing the gains in the past two days to 4 percent.
Oil has fallen 53 percent from the record $147.27 a barrel on July 11 and dropped 27 percent in the past year.
The Organization of Petroleum Countries, supplier of more than 40 percent of the world's crude, resolved to slash production by 1.5 million barrels a day at a summit in Vienna in October to check plunging crude prices.
Output Cuts
OPEC intends to defend a price ``floor'' of $80 a barrel by announcing a further cut in Algeria that would take effect at the start of next year, London-based Gareth Lewis-Davies, an analyst at Dresdner Kleinwort Group Ltd., said in a report on Oct. 31.
Production in Russia, the world's second-largest exporter, dropped for a 10th month in October as output from older fields declined faster than new wells were added, the nation's Energy Ministry said yesterday.
Iranian sales to Total SA, Europe's third-largest oil company, will fall by 70,000 barrels a day in line with cuts agreed by the Organization of Petroleum Exporting Countries last month, Oil Minister Gholamhossein Nozari said yesterday.
Oil fell 33 percent last month in a record monthly drop on signs that the economic slowdown in the U.S. and Europe will spread to emerging markets, curbing fuel consumption. The previous record price decline occurred in February 1986, when crude oil slipped 30 percent to $13.26 a barrel. Oil trading in New York began March 30, 1983.
Brent crude oil for December settlement gained as much as $1.38, or 2.1 percent, to $66.70 a barrel on London's ICE Futures Europe exchange. It traded at $66.22 at 3:26 p.m. in Singapore.
Asian stocks rose today, extending last week's rally, as South Korea pledged to pump $10.8 billion into its economy and India cut interest rates to ease the fallout from the global credit crisis.
The MSCI Asia Pacific excluding Japan Index rose 5.5 percent to 257.12 as of 3:09 p.m. in Hong Kong.
To contact the reporters on this story: Jane Lee in Kuala Lumpur at jalee@bloomberg.net; Gavin Evans in Wellington at gavinevans@bloomberg.net
