Crude Oil Rises a Second Day on Signs OPEC Will Cut Output

By Mark Shenk

Oct. 20 (Bloomberg) -- Crude oil rose for a second day on signs that the Organization of Petroleum Exporting Countries may cut output to halt a 50 percent drop in prices since July.

OPEC may pare production by 1 million to 2 million barrels a day in stages at an Oct. 24 meeting to stabilize prices, said Chakib Khelil, the group's president. Deutsche Bank AG lowered its 2009 crude-oil price estimate by 35 percent to $60 a barrel, citing the possibility of a ``major world recession.''

``OPEC is the focus,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. ``We are all waiting to see what OPEC does on Friday. A 1 or 1.5 million-barrel cut looks most likely, but as much as 3 million barrels is a possibility, although done in stages.''

Crude oil for November delivery rose 69 cents, or 1 percent, to $72.54 a barrel at 11:03 a.m. on the New York Mercantile Exchange. Prices are down 18 percent from a year ago.

``Prices will have to break through Thursday's high of $74.50 to convince me that this is anything other than a temporary bounce,'' said Tom Bentz, senior energy analyst at BNP Paribas in New York.

China's economy grew 9 percent in the third quarter, the slowest pace in five years, underscoring concern that the spreading financial crisis threatens the biggest contributor to global growth.

Emergency Meeting

OPEC, supplier of about 40 percent of the world's oil, brought forward to this week a Vienna meeting planned for November to discuss output levels.

While there's a consensus among the group's members to cut output, there's no agreement on the size of the reduction, Khelil, who is also Algeria's oil minister, said in an interview on Algerian television yesterday.

Qatari Oil Minister Abdullah bin Hamad al-Attiyah told Al Jazeera TV the cut will probably be 1 million barrels a day. Saudi Arabia, which dominates OPEC proceedings as the group's largest producer, has yet to comment on its intentions.

Goldman Sachs Group Inc. and Merrill Lynch & Co. said a 1 million-barrel cut is possible. Oil may fall below $60 a barrel if OPEC limits the cut to 1 million barrels a day, Goldman analysts said in a report dated Oct. 17. Merrill analysts said OPEC may trim supplies by 2.4 million barrels a day over 12 months if economic conditions deteriorate.

OPEC's 13 members produced 32.2 million barrels a day in September, according to a Bloomberg News survey of analysts and producers.

Positive News

``The West is going to be angry because the drop in oil prices has been just about the only positive economic news,'' Fitzpatrick said. ``Falling gasoline prices have been a great help to consumers.''

Regular gasoline, averaged nationwide, declined 3.1 cents to $2.923 a gallon, AAA, the nation's largest motorist organization, said today on its Web site. Pump prices have tumbled 29 percent from the record $4.114 a gallon reached on July 17.

``The finance markets are up a bit, which is also helping energy markets,'' Bentz said.

U.S. stocks rose as Halliburton Co.'s better-than-estimated profit improved the earnings outlook for energy companies and a decrease in global money market rates boosted bank shares.

Brent crude oil for December settlement rose $1.85, or 2.7 percent, to $71.45 a barrel on London's ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.