By Alexander Kwiatkowski and Nesa Subrahmaniyan Dec. 17 (Bloomberg) -- Crude oil rose for the first time in four days as OPEC prepared to enact its largest production cut and a falling dollar boosted demand for commodities. The producer group will trim production by 2 million barrels a day at the beginning of next year, Saudi Arabia’s oil minister said today. Russia, the world’s second-largest crude exporter, may cut output by as much as 400,000 barrels, according to Kuwait’s oil minister. The dollar fell to a 13-year low against the yen and the weakest versus the euro in 11 weeks. “The reality is that we need a cut of at least 1.5 million barrels a day along with positive rhetoric from ministers that they will continue to monitor the global demand scenario,” said Robert Laughlin, a senior broker at MF Global Ltd. “Anything less will lead to another aggressive sell-off.” Crude oil for January delivery climbed as much as $1.15 to $44.75 a barrel, and traded at $44.60 at 8:22 a.m. London time on the New York Mercantile Exchange in electronic trading. Prices have tumbled 70 percent from a record $147.27 on July 11. Yesterday, futures fell 91 cents, or 2 percent, to $43.60 a barrel on skepticism that OPEC will reduce production targets enough at a meeting today to halt a decline in prices. Oil also rallied today as the dollar declined against the euro and the yen, raising the appeal of commodities as a hedge against inflation. “The market’s driven by economic news and anything that’s affecting the demand side is moving oil,” said Gerard Burg, the minerals and energy economist at National Australia Bank Ltd. in Melbourne. “OPEC’s cut has been priced in and there’s skepticism about their adherence to quotas but any withdrawal of supplies would help.” Russian Help Saudi Arabian Oil Minister Ali al-Naimi said OPEC’s 2 million-barrel-a-day production cut will start at the beginning of next year as the group tries to halt a five-month slide in oil prices. The group’s rate of compliance with a previous output cut is more than 85 percent, al-Naimi told reporters today in Oran, Algeria, before an OPEC ministerial meeting that was scheduled to begin at 9:30 a.m. local time. OPEC is seeking the help of Russia, the world’s second- largest crude exporter, to share the burden of cuts. “OPEC appears to be caught in a ‘Catch-22’ situation,” Harry Tchilinguirian, a senior oil market analyst at BNP Paribas SA in London wrote in a report. “An attempt to aggressively boost prices, by pursuing a larger-than-expected cut, could backfire by turning sentiment even more pessimistic on the economy.” Russian Deputy Prime Minister Igor Sechin, who is attending OPEC’s meeting, is “promising to act positively,” Kuwait’s Oil Minister Mohammed al-Olaim said in a Bloomberg TV interview late yesterday. “We think they will seriously do so.” Excess Supplies A production cut of 400,000 barrels a day is being talked about by the Russians and they “do think they will have to participate in a cut,” al-Olaim added. OPEC members and Russia are under increasing pressure to reduce supplies as oil’s $100 a-barrel collapse cuts export revenue, creating budget shortfalls. “The effort to reduce supply this time around will need to overcome the hurdle of weak refiner crude demand, and not just high inventory levels,” Tchilinguirian said in his report. World oil use in 2009 will drop by 0.2 percent to 85.68 million barrels a day, the OPEC secretariat said in a report yesterday. That’s 1 million barrels a day lower than forecast last month. The U.S. Energy Department said on Dec. 9 that global demand will decline 0.5 percent to 85.3 million barrels a day. Stockpiles Climbing U.S. crude-oil and fuel supplies have climbed as the recession crimps demand. Crude inventories probably rose 600,000 barrels last week, according to the median of 11 responses in a Bloomberg News survey conducted before an Energy Department report today. The report will probably show that stockpiles of gasoline and distillate fuel, a category that includes heating oil and diesel, also increased. Brent crude oil for February settlement rose as much as $1.68, or 3.6 percent, to $48.33 a barrel on London’s ICE Futures Europe exchange, and traded at $47.93 a barrel at 8:38 a.m. local time. The January contract expired yesterday, after declining 4 cents to $44.56 a barrel. To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net

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