BLBG: Crude Oil May Rise as OPEC Members Cut Production, Survey Shows
Crude oil may rise as members of the Organization of Petroleum Exporting Countries make record output cuts to counter the recession in major consuming countries.
Thirteen of 30 analysts surveyed by Bloomberg News, or 43 percent, said futures will increase through Jan. 30. Eleven respondents, or 37 percent, forecast oil will fall and six said there will be little change. Last week, 49 percent of analysts expected prices to decline.
Saudi Arabia, OPEC’s biggest producer, has decided to cut output by 300,000 barrels a day below its OPEC quota to prop up prices, Algerian Oil Minister Chakib Khelil said on Jan. 21, according to the state-run newspaper El Moudjahid yesterday. The spread between front-month contracts and later months declined this week, reducing the incentive to stockpile crude oil.
“With the recent gains in price and the flattening out of the forward curve, we may be seeing the first evidence that the OPEC production cuts are having an impact on the crude oil market,” said Tim Evans, energy analyst with Citi Futures Perspective in New York. “If so, this could be the start of an ongoing price recovery.”
New production targets for OPEC members came into effect Jan. 1 following a Dec. 17 meeting in Oran, Algeria. The 12- member group needs to make the deepest supply cuts in its history to comply with the revised quotas. The group’s next meeting is scheduled for March 15.
The price for oil for delivery in April is $2.16 higher than for March, down from a $4.45 premium on Jan. 16. This structure, in which the subsequent month’s price is higher than the one before it, is known as contango.
Crude oil for March delivery has increased $1.10, or 2.6 percent, to $43.67 a barrel so far this week on the New York Mercantile Exchange. Prices have dropped 70 percent from the record $147.27 a barrel reached on July 11.
The oil survey has correctly predicted the direction of futures 49 percent of the time since its start in April 2004.
Bloomberg’s survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:
