NEW YORK (MarketWatch) -- Oil futures soared as high as $47 a barrel Thursday, extending their rally on growing expectations that the Organization of Petroleum Exporting Countries will cut production at its meeting next week.
Crude oil for January delivery rose $3.43, or 8%, to $46.96 a barrel in electronic trading on Globex. Earlier, the contract hit an intraday high of $47.49 a barrel.
Oil prices soared more than 3% on Wednesday.
"Currently, there appears to be no sign of the deteriorating demand outlook bottoming out, so one of the main factors supporting prices at the moment is market expectations of a large OPEC cut next week," said Nimit Khamar, an analyst at Sucden Research, in a note.
"In our opinion, if OPEC fails to meet these expectations, then oil prices could test recent lows once again," Khamar said.
OPEC is widely expected to agree on a production cut at its Wednesday meeting. In October, the group announced a production cut of 1.5 million barrels a day, but at its November meeting it left production unchanged.
"Prices were also supported by a statement by Saudi Oil Minister Ali al-Naimi who said they pumped 8.49 million barrels a day in November, less than estimated and in line with its OPEC target," said John Kilduff, an analyst at MF Global, in a note.
"It is expected that January shipments from the kingdom will be even lower, as a result of additional cuts to be announced next week from Algeria," Kilduff said.
Saudi Arabia is the largest oil producer of OPEC. With approximately one-fifth of the world's proven oil reserves, Saudi Arabia is seen as a key player within the oil cartel.
Russia, which is not a member of OPEC, will attend the cartel's meeting next week as an observer and is expected to announce proposals a cut in Russian oil production.
Also on Globex Thursday, January reformulated gasoline rose 9 cents, or 9.5%, to $1.06 a gallon and January heating oil gained 8 cents, or 6%, to $1.49 a gallon.
Global oil demand to rise in 2009: IEA
Global oil demand is expected to contract in 2008 for the first time since 1983, shrinking by 200,000 barrels a day, with the total this year revised down by 350,000 barrels a day to 85.8 million barrels a day, the International Energy Agency said Thursday in its monthly oil market report.
The IEA said demand in 2009 will rise again to a downward-adjusted 86.3 million barrels a day based on the International Monetary Fund's assumption that the global economy will gradually recover from the second half of next year.
In contrast to the IEA's expectations, the U.S. Energy Information Administration said Tuesday that global oil consumption is expected to decline by 50,000 barrels a day in 2008 and by 450,000 barrels a day in 2009, which would mark the first time in three decades that world consumption declined in two consecutive years.
Energy traders also watched developments on Capitol Hill. The U.S. House of Representatives approved a $14 billion federal loan package for the struggling Big Three automakers on a 231-170 vote late Wednesday, overcoming opposition of some Republicans but sending the bill to an uncertain fate in the Senate.
Republicans in the House and the Senate said throughout the day that a bailout for the Big Three wouldn't lead them to long-term viability or competitiveness. Read more.
In the currency markets, the U.S. dollar fell sharply against its rivals, as a surge in jobless claims and other negative economic data put the greenback under heavy selling pressure.
The dollar index , a measure of the greenback against a trade-weighted basket of six currencies, fell 0.9% to 83.97 from 85.480 in North American activity late Wednesday. See Currencies.
Dollar weakness typically boosts dollar-denominated commodities such as oil and gold. Gold futures also rallied. See Metals Stocks.
Natural-gas inventories fell by 67 billion cubic feet to stand at 3,291 billion cubic feet during the week ended Dec. 5, the Energy Information Administration reported Thursday.
Analysts at Global Insight had projected a storage withdrawal of 112 billion cubic feet.
Following the data, January natural-gas futures fell 11 cents, or 2%, at $5.58 per million British thermal units on Globex.
