BLBG: Oil Gains 4% as U.A.E. Reduces Output to Comply With OPEC Cut
Crude oil gained more than 4 percent in New York after the U.A.E. said it would cut output to comply with OPEC’s supply curbs and as traders bought contracts on concern this month’s 33 percent decline was excessive.
“The United Arab Emirates’ cut is the reason we’re strong this morning,” Rob Laughlin, senior broker at MF Global Ltd., said by telephone from London today. “Also the market was a little bit oversold at the close on Wednesday.”
Abu Dhabi National Oil Co., the U.A.E.’s state-owned oil producer, will cut crude oil supply to Asia in January and February, according to a faxed statement sent to Asian buyers. The reduction comes after the Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world’s oil, decided Dec. 17 to deepen supply cuts and set a production limit for 11 of its members at 24.845 million barrels a day, which would be 4.2 million barrels a day fewer than it pumped in September.
Crude oil for February delivery gained as much as $1.55, or 4.4 percent, to $36.90 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $36.76 at 1:49 p.m. Moscow time.
“Saudi Arabia and the U.A.E. seem to be fully compliant” with OPEC decision to reduce production to stem a steep decline in prices, Oliver Jakob, managing director of Petromatrix GmbH in Zug, Switzerland, said by telephone today.
Brent crude oil for February settlement gained as much as $1.39, or 3.8 percent, to $38 a barrel. It traded at $37.87 a barrel at 1:49 p.m. Moscow time on the ICE Futures exchange.
Holiday Rebound
Oil is poised for the first annual decline after surging fivefold in the past six years as the global recession curbs consumption of fuels. Prices fell as low as $35.13 on Dec. 24 and closed 9.3 percent lower at $35.35 on Dec. 24, the last day of trading before the Christmas holiday.
Japan’s recession deepened in November as companies cut production at the fastest pace in 55 years and rising unemployment prompted households to pare spending. Japan’s factory output plunged 8.1 percent from October, the Trade Ministry said today in Tokyo, more than the 6.8 percent estimated by economists. The jobless rate climbed to 3.9 percent from 3.7 percent. Household spending slid 0.5 percent, a ninth drop.
Nippon Oil Corp., Japan’s largest refiner, plans to reduce output by 25 percent in January and said yesterday that it may continue cuts in the first three months of 2009 on weak demand.
“There is no demand for crude oil,” said Hirofumi Kawachi, an analyst with Mizuho Investors Securities in Tokyo. “The world is in a recession.”
Stockpiles Increase
A U.S. government report this week showed a bigger-than- expected increase in supplies of gasoline and distillate fuel, which includes heating oil and diesel.
U.S. gasoline inventories rose 3.34 million barrels to 207.3 million barrels last week, the Energy Department said Dec. 24 in a report. Stockpiles were forecast to increase by 750,000 barrels, according to a Bloomberg News survey. Distillate stockpiles climbed 1.81 million barrels to 135.3 million barrels.
“Crude hasn’t bottomed out as yet because we are getting so much bad economic news,” said Tony Regan, a Singapore-based independent energy consultant, who formerly worked for Royal Dutch Shell Plc and Nexant Inc.
Crude oil may fall next week on speculation that U.S. fuel stockpiles will increase because of faltering demand, according to a Bloomberg News survey. Thirteen of 28 analysts, or 46 percent, said futures will decline through Jan. 2. Ten respondents, or 36 percent, forecast oil will increase and five said prices will be little changed.
Fuel consumption has fallen as consumers cut spending. China, the world’s second-biggest energy user, may face a surplus of coal, fuels and power in two years as demand falls and a “sizable” expansion in capacity comes online, Wang Siqiang, deputy director at the National Energy Administration, said Dec. 12.
