Oil falls below $54 in Asia after rising overnight

Oil falls below $54 in Asia after rising overnight

Singapore: Oil prices fell below $54 a barrel on Tuesday in Asia after surging overnight as investors mulled whether a US government bailout of Citigroup Inc. restores enough confidence to staunch crude’s 64% slide since July.

Light, sweet crude for January delivery was down 61 cents to $53.89 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore.

The contract overnight rose $4.57 to close at $54.50 after the Treasury Department announced a rescue of banking giant Citigroup. Fears the sprawling financial firm would collapse sent stock markets plunging and the price of oil to a 3-year low near $49 last week.

But some oil market watchers think euphoria over the government lifeline for Citigroup will soon give way to more dismal news about a severe global economic slowdown and trigger a test of the lows that oil hit last week.

Investors are eyeing the Organization of Petroleum Exporting Countries, which accounts for 40% of global supply, for signs the group may reduce output quotas at an informal meeting 29 November in Cairo.

Venezuelan Oil Minister Rafael Ramirez said on Sunday that Opec should cut oil production by 1 million barrels per day at the Cairo meeting. Opec President Chakib Khelil said on Monday that if the organization met today, a cut of 1 million barrels would not be enough to support oil prices.

The group, which cut output by 1.5 million barrels a day last month, will hold its next official meeting on 17 December.

Investors brushed off Opec’s output cut last month, but lower production should eventually help support higher prices, Moore said.