By Margot Habiby and Alexander Kwiatkowski
Sept. 10 (Bloomberg) -- Crude oil rose after OPEC urged its members to comply with output quotas, a move that would reduce supplies by 500,000 barrels a day.
The Organization of Petroleum Exporting Countries agreed at a meeting in Vienna to a total production limit for 11 members of 28.8 million barrels a day, unchanged from previous targets. OPEC Secretary-General Abdalla El-Badri said this means it will trim ``oversupply'' by about 500,000 barrels a day.
``The OPEC announcement is kind of bullish,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``On the other hand, I'm waiting to see if the Saudis make a comment. If the Saudis cut back, that will certainly be bullish.''
Crude oil for October delivery rose 66 cents, or 0.6 percent, to $103.92 a barrel at 9:30 a.m. on the New York Mercantile Exchange.
Oil has fallen about 30 percent from a record $147.27 a barrel on July 11 as high prices and slowing global economic growth reduced demand for fuels. Crude in New York yesterday reached its lowest level since April 2, while Brent oil traded in London fell as low as $99 a barrel.
``They will do whatever they can to maintain prices above this $80-$100 range,'' Johannes Benigni, managing director of JBC Energy, said of OPEC in a Bloomberg television interview today. ``If the market slides lower, you will hear more from them.''
OPEC Sentiment
Brent crude oil for October settlement rose 84 cents, or 0.8 percent, to $101.18 a barrel.
OPEC said a declining global economy and resultant falloff in oil demand along with more crude supply and the gains in the U.S. dollar had lowered prices. This means ``a shift in market sentiment causing downside risks,'' according to their statement after the meeting.
``Since the market is oversupplied, the conference agreed to abide by September 2007 production allocation (adjusted to include new members Angola and Ecuador and excluding Indonesia and Iraq) totaling 28.8 million barrels a day,'' OPEC said. These are levels ``with which members committed to strictly comply.''
OPEC has increased production this year, taking output above its agreed targets, to balance shortfalls elsewhere and satisfy the developing world's thirst for crude. Most of the increase has come from Saudi Arabia, which pledged to raise output by 500,000 barrels a day through June and July to calm prices.
OPEC's decision ``took the market by surprise,'' said Andrey Kryuchenkov, an analyst at London-based Sucden (U.K.) Ltd. ``OPEC was already oversupplying the market this summer after oil futures reached record highs.''
`Huge Oversupply'
The group's secretary-general, Abdalla El-Badri, said its decision to adhere to production quotas means it is cutting output by about 500,000 barrels a day.
OPEC members are reducing a ``huge oversupply'' of oil on the market, El-Badri said today during a press briefing at OPEC headquarters in Vienna. Before the cut, the group was producing 900,000 barrels a day above its quota, he said.
Saudi Arabia is not planning to reduce its oil production even as the group urged members to lower output, a Saudi oil official said today.
There is no change in its oil policy and Saudi Arabia will supply whatever customers demand, an oil official of the country said today.
The International Energy Agency, an adviser to 27 nations, cut its forecast for global oil demand in 2008 and 2009 as high prices and the economic slowdown reduce U.S. consumption.
`Weak Economic Prospects'
The International Energy Agency lowered its 2008 forecast by 100,000 barrels to 86.8 million barrels a day, and the 2009 estimate by 140,000 barrels to 87.6 million barrels a day, the Paris-based agency said today in its monthly report.
``A combination of weak economic prospects and persistently high prices appears to be having an impact on consumer behavior and choices,'' David Fyfe, the head of the IEA's oil industry and markets division, said in a telephone interview today.
OPEC's decision to curb supply may be ``counterproductive,'' Fyfe said. ``High oil prices are still hurting.''
Hurricane Ike started to strengthen as it entered the Gulf of Mexico and headed in the direction of Texas, after leaving more than 170 people dead when it lashed Cuba and Haiti.
Ike's eye was 145 miles (230 kilometers) north of the western tip of Cuba and moving west-northwest at 8 miles per hour at about 8 a.m. Miami time today, according to the U.S. National Hurricane Center. Ike's winds strengthened to 85 miles per hour from 80 mph earlier.
The storm is forecast to make landfall between Corpus Christi, Texas, and Houston, according to a chart from the Hurricane Center.
To contact the reporters on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net; Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net
No comments:
Post a Comment