Oil Rises a Second Day on Signs OPEC Is Poised to Reduce Output

By Gavin Evans

Oct. 20 (Bloomberg) -- Crude oil rose a second day in New York on signs OPEC is poised to cut production to stem an increase in stockpiles and a 51 percent decline in prices from July's record.

Members of the Organization of Petroleum Exporting Countries favor a cut and may pare output in stages to maintain stable prices as global growth slows, group president Chakib Khelil said in a television interview. The Conference Board's index of leading U.S. indicators, due today, probably fell for a third time in September, according to a survey of economists.

``OPEC is just trying to preempt any sort of on-going weakness in oil demand,'' Gavin Wendt, senior resources analyst at Fat Prophets Funds Management in Sydney, said in an interview with Bloomberg Television. ``We're not going to see too much more downside in oil prices from here.''

Crude oil for November delivery rose as much as $1.34, or 1.9 percent, to $73.19 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $72.60 at 7:20 a.m. in Singapore.

The contract rose $2, or 2.9 percent, to $71.85 on Oct. 17, its first gain in four days. Oil dropped 7.5 percent last week as fuel stockpiles rose amid slowing demand. Prices reached a 14-month low of $68.57 on Oct. 16.

Brent crude oil for December settlement rose 40 cents, or 0.6 percent, to $70 a barrel on London's ICE Futures Europe exchange. The contract jumped 2.6 percent to $69.60 on Oct. 17.

`Significant Cut'

OPEC, which supplies more than 40 percent of the world's oil, brought forward to Oct. 24 a November meeting to discuss output levels. While there is as yet no consensus on the size of the reduction, the group may cut by as much as 2 million barrels a day, Khelil said in an interview on Algerian television.

``That would be a significant cut,'' Fat Prophets' Wendt said. OPEC's 13 members produced 32.2 million barrels a day in September, according to a survey of analysts and producers.

Oil has more than halved from the record $147.27 a barrel reached in July as the global financial crisis threatened to push the world into recession.

Stockpiles in the U.S., the world's largest consumer, increased by 6 percent in the three weeks ended Oct. 10 as fuel use slowed. Daily gasoline demand, based on deliveries from refineries and terminals, fell to a three-year low of 8.69 million barrels in the week ended Oct. 3,

Markets have been driven more by fear and panic than ``rational, considered'' analysis in recent months and global demand for oil products is still increasing faster than new production is being developed, Fat Prophets' Wendt said.

Prices need to stabilize at about $80 a barrel to justify continued investment in exploration and development, he said.

To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net