Oil Rises as OPEC Announces Resolve to Implement Output Cuts

By Grant Smith

Dec. 22 (Bloomberg) -- Crude oil rose above $43 a barrel after OPEC restated its commitment to enact record production cuts announced last week in the face of a global economic slowdown.

The Organization of Petroleum Exporting Countries is “determined” to stabilize oil markets, Saudi Oil Minister Ali al-Naimi told reporters in Doha, Qatar, yesterday. Oil is poised for the first annual decline in seven years, falling 55 percent in New York so far in 2008.

“OPEC is lining up all its big guns to tell the world that the action taken in recent days will push prices higher,” said Rob Laughlin, senior broker at MF Global Ltd. in London.

Crude oil for February delivery rose as much as $1.08, or 2.6 percent, to $43.44 a barrel in electronic trading on the New York Mercantile Exchange. It traded for $42.99 at 1:07 p.m. London time.

Non-OPEC members Russia and Azerbaijan signaled that they may trim supplies after the producer group agreed to cut output starting January. U.S. crude oil inventories have climbed 11 percent since Sept. 19.

Oil surged almost fivefold to reach $95.98 a barrel at the end of last year from $19.84 in 2001. It has fallen 72 percent from July’s record of $147.27.

Stockpiles Rise

“OPEC has come in and said they are concerned about the price of oil where it is and non-OPEC countries have come in,” Jonathan Barratt, managing director of Commodity Broking Services in Sydney, said in a Bloomberg Television interview. “When you combine these cuts it really starts to take effect.”

The January contract, which expired last week, plunged 6.5 percent to $33.87 a barrel on Dec. 19, the lowest settlement for a contract nearest to expiration since Feb. 10, 2004. Oil is down 21 percent in December.

Futures dropped 27 percent last week on skepticism that OPEC will implement output cuts of 2.46 million barrels a day starting in January. The reduction will be in addition to the 1.5 million barrel-a-day cut the group started in November.

Oil prices fell as crude stockpiles at Cushing, Oklahoma, jumped to a 19-month high. The city is the delivery point for the New York oil futures and the amount of supplies already in place caused investors to sell the contract rather than take on barrels.

Oil use in South Korea and Japan plunged in November, government data showed today, as Asian economies sank deeper into recession. Japan imported about 3.71 million barrels a day of crude last month, down 17 percent from a year earlier, the finance ministry said. South Korea, Asia’s third-biggest crude- oil buyer, consumed 60.3 million barrels of oil products in November, 12.4 percent less from a year earlier.

Brent Crude

Brent crude oil for February settlement rose as much as 77 cents, or 1.8 percent, to $44.77 a barrel on London’s ICE Futures Europe exchange, and traded at $44.30 at 1:02 p.m. London time.

The country used 60.3 million barrels of oil products, data e-mailed by state-run Korea National Oil Corp. showed today. Hedge-fund managers and other large speculators last week increased bets on rising oil prices to the most in seven months, the U.S. Commodity Futures Trading Commission said Dec. 19.

Net-long positions, the difference between orders to buy and sell the commodity, increased more than fivefold to 64,120 contracts on Dec. 16, the commission said.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.netGrant Smith in London at gsmith52@bloomberg.net