Oil prices rose above $37 (Rs1,802) a barrel on Monday after members of the Organization of Petroleum Exporting Countries (Opec) said over the weekend they were considering more production cuts to adjust to weakening global demand for crude.
Light, sweet crude for March delivery rose 11 cents to $37.62 a barrel by mid-afternoon European time in trading on the New York Mercantile Exchange, though volumes were limited with US markets closed for Presidents’ Day. The contract rose $3.53 on Friday to settle at $37.51.
Opec has implemented most of the 4.2 million barrels a day of output reductions announced since September, but the cuts have been overwhelmed by a collapse in demand for energy amid the global economic slowdown.
On Sunday, Mohammed Saleh al-Sada, Qatar’s minister of state for energy and industry affairs, said Opec is ready to cut output further when it meets next month. Al-Sada said a reasonable price for oil would be $70 a barrel.
Venezuelan oil minister Rafael Ramirez said on Saturday his country would support new production cuts in the face of rising crude inventories.
Within Opec, however, there is scepticism over whether reducing supply will spur higher prices.
Moussa Marafi, a high-ranking Kuwaiti oil official, told Annahar newspaper in comments published on Sunday that crude prices are unlikely to rise above $40 per barrel, even if Opec decides to cut as much as two million barrels per day next month.
Oil prices are being pressured by surging US crude inventories and a lack of compliance to quotas by some Opec members, he said.
Investors have already priced in the passage of a $787 billion stimulus package that President Barack Obama plans to sign on Tuesday and will be looking for its impact on consumer and industrial demand in the coming months. Obama is scheduled to outline his mortgage-rescue proposal on Wednesday. The market will also be looking for more details on the US treasury’s bank rescue plan to get bad assets off banks balance sheets.
In London, the March Brent contract rose 20 cents to $45.01 on the ICE Futures exchange.