Singapore: Oil prices were steady near $44 a barrel Tuesday in Asia as investors anticipated that Opec will announce a big production cut next week to stabilize crude prices that have fallen about 70% in five months.
Light, sweet crude for January delivery was up 19 cents to $43.90 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract fell overnight $2.90 to settle at $43.71.
Prices fell last week to an intraday low of $40.50, the lowest since December 2004.
“Oil should find support around $40 a barrel and should form a bottom there,” said Aaron Smith, who helps manage about $1.7 billion as managing director at Superfund Financial in Singapore.
Smith, who uses technical analysis to help guide his investment decisions, has recently reduced bets that the price of oil will go down, known as shorting.
Investors are watching for signs of how much the Organization of Petroleum Exporting Countries may reduce output quotas at the group’s meeting next week in Algeria.
Opec President Chakib Khelil said on Saturday the group could announce a “severe” production cut and suggested the cartel could seek to surprise the market with the size of the reduction in a bid to bolster prices.
Opec, which controls about 40% of world crude supplies, announced a production cut of 1.5 million barrels a day in October and 500,000 barrels in September, moves investors brushed off as a global economic slowdown worsened.
Opec will have to adhere to any promised output cut if it hopes to help reverse the fall in oil prices, said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
Investors were also encouraged by news that President-elect Barack Obama plans to implement a major infrastructure program to help boost employment in the weakening US economy.