Singapore: World oil prices rebounded in Asian trade Wednesday, after the Opec oil group announced it had agreed to cut real output by 520,000 barrels a day, dealers said.
In morning trade, New York’s main contract, light sweet crude for October delivery was up 84 cents to $104.10 a barrel, while Brent North Sea crude rose 63 cents to $100.97.
Tony Nunan, manager for energy risk at Mitsubishi Corp in Tokyo, said Opec’s move reminded him of the US government’s federal takeover of ailing mortgage giants Fannie Mae and Freddie Mac, which sparked a rally in global stock markets.
The decision by the Organisation of Petroleum Exporting Countries (Opec) “is a necessary move to keep the market from collapsing,” he told AFP.
“But that doesn’t mean that it’s going to send the market back up very fast. I think it will take more time before the market can really rally from here.”
New York crude had plunged $3.08 in closing US trades Tuesday, while Brent sank below $100 for the first time in five months before settling at $100.34 but still down by $3.10.
Opec President and Algerian Energy Minister Chakib Khelil said in Vienna on Wednesday that the group’s 13 members had agreed to begin reducing production immediately.
“If you do your own calculations, it is a cut of 520,000 barrels per day,” he said, announcing a new Opec output quota of 28.8 million barrels per day excluding Indonesia — which officially left Opec Wednesday — and Iraq.
An Opec spokesman said the group’s members had agreed to “strictly” comply with the quota target.
“Since the market is oversupplied the conference agreed to abide by September 2007 production allocations totalling 28.8 million barrels per day, levels with which member countries committed to strictly comply,” said the spokesman, reading a statement from the organisation.
Opec ministers held late-night talks Tuesday to Wednesday before coming to their decision.
Oil prices peaked above $147 in July this year, but have fallen rapidly since then as a global economic slowdown reduces demand for crude and the US currency appreciates.
Nunan described OPEC’s action as a defensive move that the market thought was necessary to keep oil prices from collapsing.
However, he added that the market was expected to take a “wait-and-see approach” because the bigger concern remains the slowing global economy which has dented energy demand.
Khelil said he did not expect this decision to reverse the downward trend of oil prices. “My hunch is probably the price still will be going down despite the decision that we made,” he said.
“I don’t think this will affect the consumers in any way because first of all, there’s an oversupply. Everybody agrees on that,” he added.