Oil slips towards $43 as OPEC deal is awaited
Güncelleme Tarihi:
Oil slipped towards $43 on Wednesday as the market awaited an announcement from an OPEC meeting in Algeria widely expected to agree a big cut in production in an attempt to halt a collapse in oil prices.
A rise in the dollar also put pressure on the oil market. The U.S. currency had earlier provided support for oil by falling after a bigger-than-expected cut in interest rates by the U.S. Federal Reserve on Tuesday.
OPEC was poised on Wednesday to announce the biggest-ever reduction in oil output, a cut that could top 2 million barrels a day, as the cartel seeks to support plummeting crude prices and producers incomes.
OPEC, with 13 member nations together pumping 40 percent of world oil, was expected formally to announce its production decision following a ministerial meeting in
Cartel kingpin Saudi Arabia said on Tuesday that OPEC would announce a daily output reduction of about 2 million barrels -- which if coming solely from OPEC would be the cartel’s biggest cut since it introduced a quota system in 1982.
The expected cut, the third this year, would bring a total reduction in OPEC supply to 4 million bpd, nearly a five percent cut in world oil supplies. Oil below $50 is uncomfortable for all in OPEC, but especially for
But traders said such a cut in production had already been widely anticipated by the oil market and some investors were worried that, as the OPEC meeting dragged on, the eventual announcement could disappoint, Reuters reported.
U.S. light crude for January delivery, due to expire on Friday, were down 30 cents at $43.30 a barrel by 1240 GMT after having fallen to a low of $42.56 in the previous session, just off a four-year trough of $40.50 a barrel hit on Dec. 5.
London Brent crude for February delivery was up 24 cents at $46.89.
"A 2.0 million bpd cut in production now runs the risk of a 'Buy the rumour Sell the fact' scenario," Rob Laughlin, analyst at MF Global said. "It would have been bullish for the market a week ago. But we have been warned to expect it now so I think the market will go up initially but then come down further."
EXTRA SUPPORT
Oil prices have tumbled more than $100 from the July all-time record above $147 a barrel as financial turmoil has slowed global economic growth and hit fuel demand.
OPEC is desperate to halt the slide in prices. Economists say that at $40 per barrel, 11 of OPEC's 12 members, as well as Russia and Mexico, face budget deficits.
Analysts said any extra support OPEC could get from non-members would help support oil prices. Ex-Soviet Azerbaijan became the only non-OPEC producer on Wednesday to offer a real output cut to support oil prices, while Russia refrained from making firm commitments despite previous declarations that it would.
Mexico, which supported OPEC cuts in 1999 and 2001, said it would not cut as its output was declining.
"If OPEC can bring someone else in with a sizeable reduction then I think that may begin to have more of an impact," Simon Wardell, analyst at Global Insight, told Reuters. "If Russia announces something substantial, I think it will have more of an effect on sentiment than if OPEC has to go it alone."
In its monthly oil market report, OPEC said on Tuesday the first drop in world oil demand in 25 years would sharply lower the need for OPEC crude in 2009, opening the door for a substantial production cut at its meeting.