MW: Crude reclaims $47 as traders eye OPEC's output
Crude-oil futures rose above $47 a barrel and looked headed toward the highest price seen in three months Monday, playing off speculation that the Organization of Petroleum Exporting Countries is likely further cut members' production quotas.
"Crude-oil prices may be dictated by noise of further production cuts from OPEC nations this week, ahead of the meeting at the weekend," wrote Nimit Khamar, analyst at Sucden Financial Research.
This could push crude toward $50 a barrel, he told clients.
"A sustained rally beyond there is unlikely given large-scale risk aversion and concerns over the global economy," Khamar added.
OPEC members will gather in Vienna on March 15. The cartel's implemented a reduction in output of 4.2 million barrels a day since September, equivalent to about 5% of global oil demand.
In early action, crude for April delivery was last up $1.77, or 4%, to $47.33 a barrel on the New York Mercantile Exchange. Front-month contracts haven't closed above $47 since Dec. 11.
"The market's focus is now increasingly on supply," said analysts at Commerzbank in a research note.
Regarding OPEC, "another cut in production quotas of up to 1 million barrels a day is not ruled out," the analysts said.
Edward Meir, an analyst at MF Global, said he expected OPEC to cut production by 500,000 barrels a day to as many as 1 million barrels.
Separately, the head of China's energy bureau wrote in a commentary piece on Monday that China should use part of its nearly $2 trillion in foreign-exchange reserves to buy more gold, oil, uranium and other strategic commodities.
Zhang Guobao, head of the National Energy Administration, made the comments in an article published in China Reform Daily, a newspaper run by the goverment's powerful National Development and Reform Commission.
In the currency markets, the U.S. dollar traded mostly higher. See Currencies.
A weekend warning by the World Bank that the global economy would likely shrink in 2009 -- something not since World War II -- contributed to negative sentiment, strategists said.
Also in Nymex energy trading, April reformulated gasoline rose 0.2% to $1.3351 a gallon and April heating oil gained 1.2% to $1.2439 a gallon. However, natural gas for April delivery dropped 1.2% to stand at $3.875 per million British thermal units.
