BLBG: Oil Rises From 3-Year Low as OPEC Signals Plan to Cut Supplies
By Christian Schmollinger and Grant Smith
Dec. 3 (Bloomberg) -- Crude oil rebounded from a three-year low on speculation OPEC will cut production further this month to check the collapse in prices.
The Organization of Petroleum Exporting Countries intends to redice output when it meets on Dec. 17 in Algeria, Qatar’s Oil Minister Abdullah bin Hamad al-Attiyah said today. The U.S. Energy Department releases its weekly report on fuel inventories later today. Gasoline purchases last week rose from the previous week by 1.7 percent, according to MasterCard Inc.
“I’m very sure OPEC will cut on Dec. 17, it has to be at least 1 million barrels a day,” said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich in Vienna. “Prices are at a very low level, well below the marginal cost of supply, so I don’t expect oil to drop too much.”
Crude oil for January delivery rose as much as $1.14, or 2.4 percent, to $48.10 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $47.34 a barrel at 10 a.m. London time.
Yesterday, futures fell $2.32, or 4.7 percent, to $46.96 a barrel, the lowest settlement since May 20, 2005. Oil has tumbled 68 percent from a record $147.27 a barrel reached on July 11 and is set to decline 50 percent this year, snapping six years of gains.
U.S. gasoline demand dropped 0.3 percent last week from a year earlier, the smallest decline since April, as motor fuel prices fell, MasterCard Inc. said in its SpendingPulse report.
OPEC ‘Definitely’ to Cut
OPEC, supplier of more than 40 percent of the world’s oil, will “definitely” cut output at its next meeting in Algeria on Dec. 17 after postponing a decision last month, Qatar’s al- Attiyah said in Dubai today.
He added that he doesn’t know by how much the Organization of Petroleum Exporting Countries would reduce output. The group wants crude oil prices at between $70 and $80 a barrel “because this is the range at which you can invest.”
The group deferred a decision to cut output at a meeting on Nov. 29 in Cairo. OPEC agreed on Oct. 24 to cut shipments by 1.5 million barrels a day.
OPEC Secretary General Abdalla el-Badri said Dec. 1 in Tehran that “for sure there will be action” at this month’s summit.
U.S. Recession
The U.S. is facing its longest economic slump since World War II, said the National Bureau of Economic Research, a private non-profit group of economists based in Cambridge, Massachusetts.
“The demand isn’t going to get any stronger in the near- term,” said Toby Hassall, an analyst at Commodity Warrants Australia in Sydney. “We have to get a sense of how deep the recession is going to be in the U.S.”
U.S. crude inventories probably gained for a 10th week as demand continues to plummet in the world’s largest energy user, according to a Bloomberg survey before the Department of Energy releases its weekly report.
The report will likely show that crude-oil supplies rose 1 million barrels last week, according to the median of 13 responses in a Bloomberg News survey. It would be the 10th consecutive weekly gain. Stockpiles of gasoline and distillate fuel, a category that includes heating oil and diesel, also rose, according to the survey.
Brent crude oil for January settlement gained as much as $1.15, or 2.5 percent, to $46.59 a barrel on London’s ICE Futures Europe exchange. It was at $46.06 a barrel at 9:27 a.m. London time. The contract declined $2.53, or 5.3 percent, to $45.44 a barrel yesterday, the lowest settlement since Feb. 15, 2005.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
