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BLBG: Crude Oil Rises on Speculation OPEC, Russia Will Coordinate Cut
 
By Mark Shenk

Dec. 10 (Bloomberg) -- Crude oil rose after Russia signaled it may coordinate a production cut with OPEC next week to end the five-month, $100 slump in prices.

Energy Minister Sergei Shmatko said Russia will announce proposals for cutting output by Dec. 17, when the Organization of Petroleum Exporting Countries meets, Interfax reported. The group, source of more than 40 percent of the world’s oil, may trim production by as much as 2.5 million barrels a day next week, hedge-fund manager Boone Pickens said yesterday.

“There’s greater optimism that OPEC will take strong action at its next meeting,” said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts. “They will probably cut by at least 2 to 2.5 million barrels a day at this meeting.”

Crude oil for January delivery rose $2.16, or 5.1 percent, to $44.23 a barrel at 9:34 a.m. on the New York Mercantile Exchange. Futures, which have dropped 54 percent this year, are heading for the biggest annual decline since trading began in 1983, as global economies falter.

Commodities, including oil, copper and corn, also climbed on speculation lawmakers will approve a $15 billion bailout to keep automakers afloat in the government’s latest effort to bolster the U.S. economy.

‘Significant’ Cut

Russia’s Shmatko said he had spoken on the phone to the president of OPEC and that the producer group is preparing “significant” production cuts, Interfax said. Russia is the world’s second-largest exporter after Saudi Arabia. Norway, the next biggest non-OPEC exporter, has no plans to cut production, the petroleum ministry said.

Oil also rose as traders bought contracts to close out bets that prices will decline further. Traders who held short positions, or bets prices would fall, are purchasing futures after oil dropped more than 20 percent in the past two weeks.

OPEC should make a “substantial” output cut when it meets on Dec. 17 in Algeria, Shokri Ghanem, Libya’s top oil official, said on Dec. 8. Oil has tumbled more than 30 percent since the group announced a 1.5 million-barrel-a-day reduction in supply on Oct. 24.

OPEC will “work it back up to $100,” Pickens said in an interview in New York. “It will all be determined by the global economy. If you get a recovery in the global economy, you will get it back up.”

Brent crude oil for January settlement increased $1.77, or 4.3 percent, to $43.30 a barrel on London’s ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

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