- The Washington Times - Friday, March 13, 2009

Oil prices rose to near $48 a barrel Friday as investors wondered whether OPEC will announce a production cut at its meeting on Sunday, and how big the cut might be.

Keeping prices in check were reports from the International Energy Agency and OPEC, each lowering their estimates for global oil demand in 2009.

Benchmark crude for April delivery was up 70 cents to $47.73 a barrel by mid-afternoon in Europe on the New York Mercantile Exchange. Earlier in the session, prices peaked at $48.14.

Oil prices soared $4.70 on Thursday to settle at $47.03.

In London, Brent prices gained 74 cents to $45.83 on the ICE Futures exchange.

Prices have lurched between $42 and $47 this week as leaders of the Organization of Petroleum Exporting Countries sent mixed signals about a possible output reduction.

Nigerian and Qatari officials have suggested they oppose another production cut on top of the 4.2 million barrels a day of reductions announced by OPEC since September, while Venezuela supports further cuts.

Russian news agencies said Thursday that Vice Premier Igor Sechin would attend the OPEC meeting in Vienna and that his country supports the idea of trimming production.

“It seems to be hard for OPEC to reach consensus this time,” said Christoffer Moltke-Leth, head of sales trading at Saxo Capital Markets in Singapore. “I expect a small cut, less than the market expects.”

Most analysts are expecting a cut of between 500,000 and 1 million barrels a day.

OPEC issued its monthly oil market report on Friday, lowering the 2009 global demand estimate by a further 400,000 barrels a day to 84.6 million barrels, 1 million barrels a day less than in 2008.

OPEC also saw demand for its own crude falling by 1.8 million barrels a day on the year, to an average of 29.1 million barrels a day in 2009.

Prices have rallied from below $35 a barrel last month, but haven’t been able to breach $50 as the worst global recession in decades weighs on crude demand.

Olivier Jacob of Petromatrix in Switzerland said several market factors, including levels of oil stocks and refinery utilization, could provide OPEC with “a golden opportunity” to push prices above $50 a barrel “without having to make too great of an additional effort.”

OPEC could, for example, announce a new output cut but delay its implementation to first appraise market reaction.

On the other hand, JBC Energy in Vienna said OPEC was “unlikely to reduce output (Sunday) as they will likely wait for the impact of the last two cuts to be fully felt.”

JBC estimated OPEC members’ compliance with earlier cuts at an average of 80 percent in the first quarter of the year and at over 90 percent so far in March.

The International Energy Agency said Friday global oil demand in 2009 would drop for a second consecutive year for the first time since 1982-1983 and cut its forecast for demand this year by 270,000 barrels a day to 84.4 million barrels a day _ 1.5 percent lower than a year earlier.

The slumping U.S. economy has hurt many developing countries which rely on demand from the West for their exports. Chinese oil imports have dropped 13 percent in the first two months of the year while the country’s exports plunged 25.7 percent year-on-year in February.

“Unless there’s a massive OPEC cut, it’s well-capped at $50,” Moltke-Leth said. “We’ve seen it in black and white with China’s terrible export numbers. That’s a lot of demand destruction.”

In other Nymex trading, gasoline for April delivery rose 1.1 cents to $1.3567 a gallon, while heating oil gained 0.56 cent to $1.2320 a gallon. Natural gas for April delivery fell 7.5 cents to $3.920 per 1,000 cubic feet.

___

Associated Press writer Alex Kennedy in Singapore contributed to this report.

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