- The Washington Times - Tuesday, March 17, 2009

VIENNA (AP) - Oil prices moved above $48 a barrel Tuesday amid growing confidence that OPEC’s decision to ensure members comply with production quotas will support the market for crude.

Still, persistent concerns over the global financial crisis were expected to exert moderate downward pressure on prices in the coming weeks.

Benchmark crude for April delivery gained 78 cents to $48.13 a barrel by afternoon in Europe on the New York Mercantile Exchange. Prices fell as low as $43.62 a barrel Monday but rebounded to close up $1.10 at $47.35.

“At the moment, it’s a holding pattern. There are no major news that justify movement in the price. The international economic environment remains very weak,” said David Moore, commodity strategist at Commonwealth Bank of Australia.

Members of the Organization of Petroleum Exporting Countries said Sunday they will try to stick more closely to the group’s current output quotas but will not make further cuts to try and curb falling demand.

OPEC’s move dragged down oil prices early Monday but prices recovered overnight.

“The OPEC decision to maintain production levels until it next meets has all the hallmarks of showing concern over the global economy,” said Howard Wheeldon, senior strategist at BGC Partners in London. “It does not seek to make things worse and it certainly does not want to lay down any impediments to speeding global recovery.”

Still, given the worsening global economic outlook, Moore said a “moderate downward bias” in oil prices was likely over the next few months.

Prices had risen from under $35 a barrel last month as investors anticipated OPEC would cut production by up to 1 million barrels a day on top of 4.2 million barrels of reductions announced since September.

While some of the oil producers at Sunday’s meeting said they supported another cut, Saudi Arabia argued for stricter compliance with existing output reductions. OPEC is overshooting its daily target level of just under 25 million barrels a day by about 800,000 barrels.

Analysts said some OPEC producers are convinced that to get long-term demand growth, they have to stimulate the economy with lower prices as opposed to trying to slow it down by raising prices.

Saudi Arabia’s oil minister however, said Monday that petroleum-producing countries need a price of at least $60 a barrel to bring more energy resources on the market.

“If we want all hydrocarbon resources developed worldwide, 40 dollars is not enough,” Ali Naimi told reporters in Geneva.

A new production cut remains an option during a May 28 OPEC special session to review prices and supply.

Some dealers said oil traders will likely turn their attention to global crude demand and the possibility of a second-half economic recovery.

In other Nymex trading, gasoline for April delivery was up slightly at $1.38 a gallon, while heating oil rose by nearly 4 cents to $1.25 a gallon. Natural gas for April delivery was down a penny at $3.84 per 1,000 cubic feet.

In London, Brent crude gained 48 cents to sell for $46.94 a barrel on the ICE Exchange in London.


Associated Press writer Eileen Ng contributed to this report from Kuala Lumpur, Malaysia.

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