- The Washington Times - Friday, March 13, 2009

Oil prices rose to above $47 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 was a report from International Energy Agency, which lowered its estimate for global oil demand in 2009.

Benchmark crude for April delivery was up 58 cents to $47.61 a barrel by midday in Europe on the New York Mercantile Exchange. Oil prices soared $4.70 on Thursday to settle at $47.03.

In London, Brent prices gained 30 cents to $45.39 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.

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.

On Thursday, the U.S. reported retail sales fell in February for the seventh time in the past eight months. And the Labor Department reported that first-time requests for unemployment insurance rose to 654,000 from the previous week’s upwardly revised figure of 645,000, above analysts’ expectations.

The number of people receiving benefits for more than a week also increased by 193,000 to 5.3 million, the most on records dating back to 1967.

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.”

Traders were also waiting for Friday’s reports on global demand expectations by OPEC and by the International Energy Agency in Paris.

In other Nymex trading, gasoline for April delivery rose 1.42 cents to $1.3599 a gallon, while heating oil gained 0.76 cent to $1.2340 a gallon. Natural gas for April delivery was steady at $4.00 per 1,000 cubic feet.


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

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