Oil Little Changed on Speculation OPEC Cut Won’t Boost Prices

By Grant Smith and Gavin Evans

Nov. 24 (Bloomberg) -- Crude oil traded little changed after dropping below $49 a barrel in New York on speculation that further production cuts by OPEC won’t be enough to prevent a glut in supplies.

Slowing global demand has left a 1 million-barrel-a-day oversupply that needs to be removed by year-end, Venezuela’s Oil Minister Rafael Ramirez said yesterday. The U.S. recession probably deepened as consumer spending plunged in October, according a Bloomberg survey before government data this week.

“The concern is that OPEC will not deliver a cut of the magnitude needed to offset the slump in global demand, which shows no sign of improving,” said Rob Laughlin, senior broker at MF Global Ltd. in London. “They have to deliver but at the same time adhere to any pledges.”

Crude oil for January delivery traded for $50.02 a barrel on the New York Mercantile Exchange at 9:50 a.m. London time. It earlier fell as much as $1.13, or 2.3 percent, to $48.80. Prices are down 66 percent from the record $147.27 a barrel on July 11, and touched a three-year low of $48.25 on Nov. 21.

“We are worried about the direction of prices,” Shokri Ghanem, Libya’s top oil official, said in an interview from Tripoli. “We need to see if the oil price is falling because liquidity is leaving the market or if there is too much oil in the market.”

Ghanem said that it’s too early to say how much supply needs to be cut when the group meets in Cairo at the end of the week.

Investment Danger

Brent crude oil for January settlement was at $49.25 a barrel, up 6 cents, on London’s ICE Futures Europe exchange at 9:50 a.m. London time.

New York oil futures have fallen as the U.S., Japan and much of Europe slipped into recession, equity prices slumped and a rising U.S. currency reduced the appeal of dollar-priced commodities.

U.S. purchases declined 1 percent after a 0.3 percent drop the prior month, according to the median estimate of economists surveyed by Bloomberg News ahead of Commerce Department figures due Nov. 26. Commerce may also report the same day that orders for long-lasting goods fell for the second time in three months.

Oil ministers from the 13-nation Organization of Petroleum Exporting Countries group meet in Cairo on Nov. 29. Venezuela, OPEC’s fifth-largest producer, will be seeking a 1 million- barrel-a-day cut and assurance that the 1.5 million-barrel reduction agreed on Oct. 24 is being implemented, Ramirez said.

Investment Danger

The benchmark crude price used by OPEC, derived from the cost of oil produced by each of its 13 members, fell to its lowest since February 2005 on Nov. 21. This so-called OPEC basket declined $1.50 to $42.56 a barrel, the group said in an e-mail today.

OPEC “needs higher prices, so they will intervene,” Total SA’s Chief Executive Officer Christophe de Margerie said in an interview on RTL radio and LCI television yesterday. He called an oil price below $50 a “danger” that will curtail investment in new oil fields.

“The market now sees that OPEC is more likely to cut production,” said Clarence Chu, a trader with options dealer Hudson Capital Energy in Singapore. “To be effective, it must be a 1.5 million-barrel-a-day cut or more. Even 1 million won’t be enough because the sentiment has been so bearish.”

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net