Oil Rises From 13-Month Low as Stocks Gain, OPEC May Cut Output

By Nesa Subrahmaniyan and Christian Schmollinger

Oct. 17 (Bloomberg) -- Crude oil rebounded from a 13-month low in New York as stock markets rallied and on speculation OPEC may announce production cuts at a meeting next week.

Prices fell below $70 a barrel yesterday as U.S. oil inventories rose more than twice as forecast last week, and then rebounded in after-hours electronic trading as Wall Street and Asian stocks rallied. Oil also climbed after OPEC said it brought forward to next week a November meeting to discuss output levels.

``OPEC has to cut, but the only question is by how much,'' said Tetsu Emori, a fund manager at Astmax Co. in Tokyo. ``The U.S. stock market rally had earlier given oil prices an impetus to move up and there's talk about OPEC cutting by 1 million barrels a day, which is bullish.''

Crude oil for November delivery rose as much as $3.17, or 4.5 percent, to $73.02 a barrel, and traded at $72.78 at 1:40 p.m. Singapore time on the New York Mercantile Exchange. Yesterday it fell $4.69, or 6.3 percent, to $69.85 a barrel, the lowest settlement since Aug. 23, 2007.

Asian equities rose, paced by Japanese banks and automakers, and U.S. stock futures gained on signs governments are succeeding in efforts to unlock credit markets.

``As investors see the stock market recover, they want to buy into oil on the perception that the stock market movements are indicative of the future direction of oil,'' said Andy Lipow, president of Houston-based Lipow Oil Associates LLC in Houston. OPEC ``is concerned about crude's rapid price drop, and they may announce a production cut.''

Stocks Rally

MSCI's Asian index added 1.1 percent to 87.83 as of 12:39 p.m. in Tokyo. Financial shares comprised a quarter of the gains. The index, having posted its biggest-ever advance and decline in the past three days, is set to rise 2.2 percent this week.

Standard & Poor's 500 Index futures added 0.5 percent. Japan's Nikkei 225 Stock Average climbed 1.8 percent to 8,614.35, the region's biggest advance and set for a 4.1 percent weekly gain.

MSCI's Asian index tumbled 31 percent in the previous six weeks as credit markets seized up, economies slowed and companies failed, making the region's equities their cheapest ever.

Yesterday, the Dow Jones Industrial Average rebounded from a decline of as much as 380 points spurred by the biggest drop in industrial production in 34 years. The index swung by more than 700 points for the sixth straight day.


One Million Barrels

OPEC, which supplies about 40 percent of the world's oil, will likely reduce oil output by 1 million barrels a day at next week's meeting to check the drop in prices, Qatari Oil Minister Abdullah al-Attiyah said.

``It will be one million, or more,'' he told Qatar's Al- Jazeera television channel. ``Prices have fallen a lot and we need to take measures.''

OPEC reduced its forecast for average oil demand next year by 450,000 barrels a day, or 0.5 percent, to 87.21 million barrels a day, in a report Oct. 15.

``If prices fall to a point when it creates budgetary issues for the individual member countries, they have to act,'' Serene Gardiner, a Dubai-based oil-products analyst at Standard Chartered Plc, said in a Bloomberg Television interview from Kuala Lumpur.

OPEC oil supplies fell 3.8 percent in September to 31.8 million barrels a day, according to revised data from Geneva- based consultants PetroLogistics Ltd. The amount declined from 33.05 million barrels in August because of lower sales by Saudi Arabia and Iran, company founder Conrad Gerber said by e-mail yesterday.

OPEC Estimates

Preliminary estimates from PetroLogistics had indicated a reduction in September supply of 2.4 percent to 32.6 million barrels a day.

Saudi Arabia, the group's biggest member, trimmed its supply to 9.18 million barrels a day last month from 9.7 million a day in August, while Iran reduced its to 3.7 million a day from 4.3 million.

``OPEC's big two sold far less than they actually produced,'' Gerber said.

U.S. crude oil supplies rose 5.6 million barrels to 308.2 million barrels last week, the Department of Energy said in a weekly report yesterday. Crude oil inventories were forecast to rise 2.6 million barrels, according to the median of analyst estimates in a Bloomberg News survey.

Gasoline stockpiles climbed 6.97 million barrels to 193.8 million barrels in the week ended Oct. 10, the report showed. Supplies were forecast to rise 3 million barrels, according to the Bloomberg survey.

Brent crude oil for December settlement rose as much as $2.76, or 4.1 percent, to $70.60 a barrel on London's ICE Futures Europe exchange. It was at $70.30 a barrel at 12:36 p.m. Singapore time.

To contact the reporters of this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net; Christian Schmollinger in Singapore at christian.s@bloomberg.net.