Tokyo: Oil bounced back $1 to trade above $47 a barrel on Monday on signs that Opec members are set to make a deep supply cut when the oil cartel meets later this week, in an effort to prop up prices.
Rising equities and a weaker dollar also lent support to oil, which has lost $100 since its record high of over $147 in mid-July on growing fears of slowing world appetite for energy amid a mounting global financial crisis.
US light crude for January delivery rose $1.04 to $47.32 a barrel by 7:40am (IST), having risen earlier to $47.41. The contract closed $1.70 lower on Friday after the US Senate failed to pass a bailout for automakers and Goldman Sachs predicted oil could fall to $30.
London Brent crude gained 69 cents to $47.10.
“OPEC’s bullish comments on supply cuts, such as 2 million barrels per day, is supporting the price,” said Ken Hasegawa, a commodity derivatives sales manager at broker Newedge in Tokyo.
Equity markets in Asia opened higher on Monday, with Japan’s benchmark Nikkei 225 Index up 4.24% on hopes of a lifeline for the struggling US auto industry.
Opec ministers are in agreement on the need to cut output when they meet on Wednesday in Algeria to prop up sagging prices, Opec President Chakib Khelil said on Saturday, but declined to say by how much the organisation would cut.
Iran will propose that Opec cuts its oil output by between 1.5 and 2 million bpd, Iran’s oil minister was quoted as saying on Sunday.
In two meetings since early September, the Organization of the Petroleum Exporting Countries (Opec) has agreed to reduce supply by a total of two million barrels per day (bpd) but prices have continued falling.
US Department of Transportation figures showed on Friday US motorists drove 9 billion fewer miles in October than a year earlier, down 3.5%.
Equity markets opened higher in Asia on Monday after the Bush administration said it could be willing to provide emergency aid to the teetering US auto industry, keeping open the prospects for a bailout the day after Congress failed to approve a deal.