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Oil prices diverge as Opec eyes more cuts

Oil prices diverge as Opec eyes more cuts
AFP
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First Published: Fri, Jan 30 2009. 09 13 AM IST
Updated: Fri, Jan 30 2009. 09 13 AM IST
New York: Oil prices were mixed on Thursday as Opec said it would consider further reductions in output to bolster the market amid tumbling demand for energy because of the global economic slump.
New York’s main futures contract, light sweet crude for delivery in March, shed 72 cents from its closing price Wednesday to end the day at $41.44 a barrel.
But Brent North Sea crude for March gained 50 cents to settle at $45.40 on London’s InterContinental Exchange.
Some expect pressure on prices to continue amid contracting demand.
“Holding above $40 will become increasingly difficult as reportage enumerates evidence of contracting demand,” said John Kilduff, energy analyst at MF Global.
Opec members need an oil price above $50 to make exports worthwhile, the head of the cartel said Thursday, adding that more production cuts were possible later this year.
“We are not happy with 40, even $50 a barrel,” Opec Secretary General Abdalla Salem El-Badri told a panel discussing energy security at the World Economic Forum in Davos.
Asked about further cuts, he said: “If we still have some downward problems (of prices), Opec will not hesitate to take some quantity out of the market.
“We cannot tell at this time before our next meeting on 15 March.”
The Organization of Petroleum Exporting Countries, or Opec pumps 40% of the world’s oil and late last year cut output by a total 4.2 million barrels per days as prices slumped from record highs of $147 reached in July.
Current price levels have reportedly held back investments by producers, including to expore and pump more oil when the situation warranted.
“If these conditions persist it could lead to shortages once demand picks up,” Kilduff said. “For investors, that moment is still over the horizon.”
Oil prices had risen on Wednesday as hopes for an economic rebound offset the impact of surging US crude oil inventories and a gloomy global outlook from the International Monetary Fund, traders said.
The US government’s Energy Information Administration (EIA) said crude reserves jumped 6.2 million barrels in the week to 23 January, which was more than double market expectations and indicated weaker demand.
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First Published: Fri, Jan 30 2009. 09 13 AM IST