By Christian Schmollinger Dec. 22 (Bloomberg) -- Crude oil rose in New York on speculation OPEC’s planned production cuts will counter a slump in demand caused by the deepening global recession. The Organization of Petroleum Exporting Countries is “determined” to stabilize oil markets, Saudi Oil Minister Ali al-Naimi said in Doha, Qatar, yesterday. Oil is poised for the first decline in seven years, falling 55 percent so far in 2008. “It’s a bit of a delayed reaction to the OPEC cuts,” said Toby Hassall, an analyst at Commodity Warrants Australia Ltd. in Sydney. “It’s not like people all of sudden realized cuts will be made but people realized that supply will get cut back significantly in the coming months.” Crude oil for February delivery gained as much as $1.08, or 2.6 percent, to $43.44 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $43 at 12:45 p.m. in Singapore. Non-OPEC members Russia and Azerbaijan signaled that they may trim supplies after the producer group agreed to trim output starting January. U.S. crude oil inventories have climbed 11 percent since Sept. 19. Oil had surged almost fivefold to $95.98 a barrel at the end of last year from $19.84 in 2001. Stockpiles Rise “OPEC has come in and said they are concerned about the price of oil where it is and non-OPEC countries have come in,” Jonathan Barratt, managing director of Commodity Broking Services in Sydney, said in a Bloomberg Television interview. “When you combine these cuts it really starts to take effect.” The January contract, which expired last week, plunged 6.5 percent to $33.87 a barrel on Dec. 19, the lowest settlement since Feb. 10, 2004. Oil is down 21 percent in December. The January futures dropped 27 percent last week on skepticism that OPEC will implement output cuts of 2.46 million barrels a day starting in January. The reduction will be in addition to the 1.5 million barrel-a-day cut the group started in November. Oil prices also fell as crude stockpiles at Cushing, Oklahoma, jumped to a 19-month high. The city is the delivery point for the New York oil futures and the high amount of supplies already in place caused investors to sell the contract rather than take on barrels. Brent crude oil for February settlement rose as much as 77 cents, or 1.8 percent, to $44.77 a barrel on London’s ICE Futures Europe exchange, and traded at $44.20 at 12:46 p.m. Singapore time. Falling Dollar Crude oil also climbed as the dollar slide against the euro, increasing the attractiveness of commodities as an investment. The currency dropped to $1.3972 per euro from $1.3912. It slid to an 11-week low of $1.4719 on Dec. 18. “The weaker dollar should be helping prices a little,” said Commodity Warrants’ Hassall. “If that rally in the dollar on Friday turns out to be something temporary, then we should see commodities across the board have some support.” Prices were also supported as Asian stock markets advanced after the U.S. government pledged a $13.4 billion support plan for the nation’s biggest carmakers. The MSCI Asia Pacific Index added 0.1 percent to 89.63 as of 12:13 p.m. in Tokyo, as five stocks rose for every four that fell. “The automaker bailout should keep the market sentiment buoyant up until the New Year,” said Hassall. “If we see further gains in stocks, that should provide fairly good support for crude.” Hedge-fund managers and other large speculators last week increased bets on rising oil prices to the most in seven months, the U.S. Commodity Futures Trading Commission said Dec. 19. Net-long positions, the difference between orders to buy and sell the commodity, increased more than fivefold to 64,120 contracts on Dec. 16, the commission said. To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net

Source