Crude Oil Falls After OPEC Delays Decision to Reduce Production

By Alexander Kwiatkowski

Dec. 1 (Bloomberg) -- Crude oil fell below $52 a barrel after the Organization of Petroleum Exporting Countries deferred a decision to reduce output for another two weeks.

OPEC postponed a decision until Dec. 17 while it gauges the impact of a 1.5-million barrel reduction agreed in October. The group will definitely trim output at its next meeting, its secretary general said today. Slowing global growth means demand will be “much lower” than expected a month ago, OPEC said in a statement after the meeting.

“OPEC is not finding buyers for its oil and the economic slowdown is both deeper and more widespread than any of us feared,” said Robert Laughlin, senior broker at MF Global Ltd. in London. OPEC “may well observe in horror as prices fall significantly in coming days.”

Crude oil for January delivery fell as much as $2.93, or 5.4 percent, to $51.50 a barrel in electronic trading on the New York Mercantile Exchange. It was at $51.64 a barrel at 12:44 p.m. in London.

OPEC ministers deferred debate on a second cut in output in as many months during meetings in Cairo on Nov. 29. The group will reduce crude production further when it meets in Oran, Algeria, on Dec. 17, OPEC Secretary General Abdalla el-Badri said. Oil demand is likely to drop further next year, he said.

“For sure there will be action,” at the meeting, el-Badri told reporters in Tehran today, declining to specify the amount of output that may be reduced. “The market is oversupplied,” el-Badri said. “We are seeing the stocks are very high.”

‘Fair’ Price

Prices around $75 a barrel would be “fair” and would support investment in new fields, Saudi Arabian Oil Minister Ali al-Naimi said at the weekend. The global market is oversupplied by more than 2 million barrels a day, Iranian Oil Minister Gholamhossein Nozari said yesterday.

“The Cairo meeting had been downplayed by OPEC, but it did not even produce a common statement and provided no clear hint as to the next line of action,” said Olivier Jakob, managing director of Zug, Switzerland-based Petromatrix.

Brent crude oil for January settlement fell as much as $2.69, or 5 percent, to $50.80 a barrel on London’s ICE Futures Europe exchange today. It was at $51.20 a barrel at 12:23 p.m. local time.

New York oil futures have tumbled 64 percent from their July 11 record of $147.27 a barrel as the U.S., Europe and Japan entered their first simultaneous recession since World War II.

“There was a lot of expectation actually built up despite OPEC always saying they were never going to cut at this meeting,” Simon Wardell, energy research manager at Global Insight Inc. in London, said in a Bloomberg TV. “A lot of people were speculating and we could see prices come down now.”

A report today in the U.S., the world’s largest oil consumer, will probably show manufacturing contracted for a fourth month in November, according to a survey of economists. The forecast decline will take the Institute for Supply Management’s factory index to the lowest in 28 years.

U.S. crude oil inventories jumped 2.3 percent to 320.8 million barrels in the week ended Nov. 21, the most in six months, according to Energy Department data.

To contact the reporters on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net.