Oil Rises on Expected Supply Cut

Crude oil rose a second day in New York on signs OPEC is poised to cut production to stem an increase in stockpiles and a 51 percent decline in prices from July's record.

Crude oil for November delivery rose as much as $1.34, or 1.9 percent, to $73.19 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $72.60 at 7:20 a.m. in Singapore.

The contract rose $2, or 2.9 percent, to $71.85 on 17 October, its first gain in four days. Oil dropped 7.5 percent last week as fuel stockpiles rose amid slowing demand. Prices reached a 14-month low of $68.57 on 16 October.

Brent crude oil for December settlement rose 40 cents, or 0.6 percent, to $70 a barrel on London's ICE Futures Europe exchange. The contract jumped 2.6 percent to $69.60 on 17 October.

Members of OPEC favour a cut to maintain stable prices as global growth slows, group president Chakib Khelil said in a television interview. The Conference Board's index of leading U.S. indicators, due today, probably fell for a third time in September, according to a survey of economists.

“OPEC is just trying to pre-empt any sort of on-going weakness in oil demand,” Gavin Wendt, senior resources analyst at Fat Prophets Funds Management in Sydney, said in an interview with Bloomberg Television. “We're not going to see too much more downside in oil prices from here.''

OPEC, which supplies more than 40 percent of the world's oil, brought forward a meeting scheduled for November to 24 October to discuss output levels. While there is as yet no consensus on the size of the reduction, the group may cut by as much as 2 million barrels a day, Khelil said in an interview on Algerian television.

“That would be a significant cut,” Fat Prophets' Wendt said. OPEC's 13 members produced 32.2 million barrels a day in September, according to a survey of analysts and producers.

Oil has more than halved from the record $147.27 a barrel reached in July as the global financial crisis threatened to push the world into recession.

Stockpiles in the U.S., the world's largest consumer, increased by 6 percent in the three weeks ended Oct. 10 as fuel use slowed. Daily gasoline demand, based on deliveries from refineries and terminals, fell to a three-year low of 8.69 million barrels in the week ended Oct. 3,

Markets have been driven more by fear and panic than “rational, considered” analysis in recent months and global demand for oil products is still increasing faster than new production is being developed, Fat Prophets' Wendt said.

Prices need to stabilize at about $80 a barrel to justify continued investment in exploration and development, he said.

Author: Jo Amey