Oil Rises From 4-Year Low on Speculation Supply Cuts Will Work

By Alexander Kwiatkowski

Dec. 18 (Bloomberg) -- Crude oil rose from a four-year low on speculation that OPEC’s record production cut and potential reductions by Russia and Azerbaijan will more than compensate for declining demand.

The Organization of Petroleum Exporting Countries yesterday agreed that the group’s 11 members with quotas will trim current production by 9 percent to 24.845 million barrels a day in an attempt to stabilize prices. Russia and Azerbaijan signaled they may be willing to trim supplies as well.

“Continuing falls in OPEC output combined with weak and falling non-OPEC output, ultimately should counteract a fall in demand,” Barclays Capital analyst Paul Norrish said in a note yesterday. “Our belief is that OPEC would be covered for an even greater demand fall.”

Crude oil for January delivery rose as much as 84 cents, or 2.1 percent, to $40.90 a barrel in electronic trading on the New York Mercantile Exchange today. The contract traded at $40.48 a barrel at 9:15 a.m. London time.

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