By Christian Schmollinger Dec. 19 (Bloomberg) -- Crude oil headed for the second- biggest weekly decline in more than five years as a deepening global recession saps demand, countering efforts by OPEC to boost prices. Oil has dropped 33 percent this month even as OPEC agreed to its largest production cut in more than a decade because traders speculated that falling demand would outweigh the reduction. Global oil use may decline the most since 1983, Deutsche Bank analyst Adam Sieminski said yesterday. ``Everyone is revising back demand forecasts and OPEC is desperately cutting in order to catch up to where the market is,'' said Gerard Burg, energy and minerals economist at National Australia Bank Ltd. in Melbourne. ``There is a feeling that OPEC isn't in control.'' Crude oil for January delivery was at $36.40 a barrel, up 18 cents, at 1:15 p.m. Singapore time on the New York Mercantile Exchange. Oil has fallen 21 percent this week. The January contract expires today. The more-active February contract rose as much as 98 cents, or 2.4 percent, to $42.65 a barrel. It was at $42.62 a barrel at 1:22 p.m. Singapore time. Prices have tumbled 75 percent from a record $147.27 a barrel on July 11 and declined 62 percent this year, snapping six years of consecutive gains. Brent crude oil for February settlement was at $43.92 a barrel, up 56 cents, on London's ICE Futures Europe exchange. The contract yesterday declined $2.17, or 4.8 percent, to settle at $43.36 a barrel. OPEC Cuts The Organization of Petroleum Exporting Countries, which pumps 40 percent of the world's oil, agreed on Dec. 17 to cut output by 2.46 million barrels a day starting on Jan. 1. That's larger than a 2 million-barrel reduction indicated on Dec. 16 by Saudi Arabian Oil Minister Ali al-Naimi before the OPEC ministers met in Oran, Algeria. OPEC has called on other exporters to help it bolster prices. Non-OPEC members Russia and Azerbaijan signaled on Dec. 17 that they may be willing to trim supplies to help the group. World oil consumption next year will drop by 0.2 percent to 85.68 million barrels a day, OPEC said in a Dec. 15 report. The U.S. Energy Department said on Dec. 9 that global demand will decline 0.5 percent to 85.3 million barrels a day. ``We're still in a state where the market is searching for a bottom,'' said National Australia's Burg. ``That's the case quite widely across all commodities.'' Oil Contango February futures cost $5.45 a barrel more than January oil yesterday, based on Nymex settlement prices. It's the biggest premium between the two most-active contract months in Bloomberg data going back to 1986. The spread allows oil traders who can line up credit and storage space to lock in profits by buying and holding crude oil to sell a month from now. ``If you can pick it up and hedge it forward and put in storage, then people will do that but it seems like storage is already getting full,'' said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo. ``That time spread is unbelievable and it just shows you how worthless prompt crude is.'' Oil for delivery in January 2010 is 53 percent more than for delivery in January 2009, increasing the opportunity for traders to profit. This price structure, in which the subsequent month'sprice is higher than the one before it, is known as contango. Contango trading encourages companies to increase stockpiles. U.S. crude-oil supplies rose in 11 of the past 12 weeks, according to the DOE. Inventories at Cushing, Oklahoma, where oil that's traded on Nymex is stored, climbed 21 percent to 27.5 million barrels last week, the highest since May 2007, the government said on Dec. 17. Oil companies have booked 25 supertankers to store crude, enough to supply France for almost a month. The vessels, equal to about 5 percent of the global fleet, can carry as much as 50 million barrels. ``In the short term the price can be pretty much anything because of all the crude in storage on the water,'' said Mitsubishi's Nunan. To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.

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