By Christian Schmollinger Nov. 28 (Bloomberg) -- Oil fell in New York on speculation a potential OPEC production cut to support prices may not outweigh declining fuel demand amid the global recession. OPEC members may consider a reduction at their meeting this weekend in Cairo to stabilize the market, Shokri Ghanem, chairman of Libya's National Oil Corp., said yesterday. Crude oil futures traded in New York have slumped 63 percent from a record $147.27 a barrel reached on July 11. ``OPEC can only control one side of the equation and that is the supply side,'' Stephen Schork, president of Schork Group Inc. in Villanova, Pennsylvania, said in a Bloomberg Television interview. ``They can't impact the demand side one bit. We know demand is weak and we are pretty sure it will get even weaker.'' Crude oil for January delivery dropped 79 cents, or 1.5 percent, to $53.65 a barrel at 12:26 p.m. Singapore time in electronic trading on the New York Mercantile Exchange. Nymex was open only for electronic trading yesterday because of the U.S. Thanksgiving holiday. Futures closed at $54.44 on Nov. 26 after rising 7.2 percent. Concerns about oil consumption have increased after reports showed the U.S. economy slowed and consumer spending fell. Gasoline demand dropped 1.3 percent from last week, the Energy Department said in its weekly report. ``Demand has just been coming off and off,'' said Jonathan Kornafel, director for Asia at options trader Hudson Capital Energy in Singapore. ``Gas prices in the U.S. are cheaper than they were a year ago and you're still seeing demand drop.'' Crude, which has fallen in the past three weeks, is poised to gain this week after the U.S. government promised $800 billion to help unfreeze credit markets. The European Union has also pledged 200 billion euros ($259 million) to aid the 27- nation economy. OPEC Gathers Brent crude oil for January settlement fell as much as 53 cents, or 1 percent, to $52.60 a barrel on London's ICE Futures Europe exchange. It was at $52.95 a barrel at 11:18 a.m. Singapore time. Prices declined 1.5 percent yesterday. Ministers from the Organization of Petroleum Exporting Countries, which supply 40 percent of the world's oil, are meeting tomorrow for the third time in as many months to discuss a further cut in production after crude prices plunged. OPEC decided last month to reduce production quotas by 1.5 million barrels a day. The Cairo meeting, originally intended just for ministers from Arab nations, was expanded into a full OPEC meeting to include Venezuela, Iran and Angola. Oil Stockpiles The crude oil market is over-supplied, OPEC Secretary- General Abdalla el-Badri said yesterday in an interview in Cairo. He declined to recommend a course of action, saying any decision concerning production quotas was up to ministers to take. Global oil stockpiles stand at about 56 days of supply, higher than the five-year average, El-Badri said. That's more than the 52-day level that OPEC would expect at this time of year, he said. OPEC plans to evaluate compliance with the 1.5 million barrel a day cut from last month, said Rafael Ramirez, Venezuela's oil minister, yesterday. The group is only likely to meet about 60 percent of that cut, Johannes Benigni, chief executive officer at Vienna-based JBC Energy GmbH, said during an Oct. 23 speech. ``They might say that they will cut 1 million barrels but in reality the market knows maybe they'll cut 500,000 to 600,000 barrels,'' said Schork Group's Schork. ``And that's simply not enough to exercise the surplus out of the market.'' Daily Shipments Daily shipments of oil from OPEC will fall 1.6 percent in the four weeks to Dec. 13, said industry consultant Oil Movements. The group will load 24 million barrels a day in the period, down from 24.38 million barrels a day. ``They are actually doing something,'' said Hudson Capital Energy's Kornafel. ``But I think they are a step behind everybody. Which is understandable because I don't think anyone expected this kind of drop.'' Economic reports earlier this week in the U.S. showed a deepening recession that may cut fuel demand in the world's largest oil user. Consumer spending slumped the most in seven years and orders for durable goods including refrigerators and washing machines declined twice as much as forecast, the Commerce Department said Nov. 26. Fourteen of 38 analysts surveyed by Bloomberg News, or 36 percent, said oil prices will decline through Dec. 5. Twelve respondents, or 32 percent, said oil will rise and 12 forecast oil will be little changed. To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.

Source