Oil Is Little Changed After Rising on Gaza Attacks, OPEC Cuts

By Christian Schmollinger

Jan. 6 (Bloomberg) -- Crude oil traded little changed near a five-week high on speculation that OPEC is implementing a 9 percent production cut and concerns an expansion of the Gaza Strip conflict may disrupt Middle East supplies.

The Organization of Petroleum Exporting Countries is likely to make all the output cuts promised at its last meeting, causing global stockpiles to fall this quarter, an official from a Persian Gulf member of the group said. Oil gained yesterday as Israeli warplanes bombarded Palestinian targets and thousands of soldiers moved into Gaza.

“The cuts that OPEC has made are fairly material and as we go forward the impact will be increasingly supportive to the oil price,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “I’m not sure there are direct implications to oil supply but people are concerned about the uncertainty of where this Middle East conflict will end up.”

Oil for February delivery was at $48.54 a barrel, down 27 cents, in electronic trading on the New York Mercantile Exchange at 9:31 a.m. Singapore time. Futures yesterday rose $2.47, or 5.3 percent, to $48.81 a barrel, the highest settlement since Dec. 1. Prices have rallied 38 percent since Dec. 24.

Full implementation of OPEC’s 4.2 million barrel-a-day reduction in supplies will send inventories below their five- year average, said the official with direct knowledge of OPEC’s deliberations, declining to be identified by name because he isn’t authorized to speak publicly. It’s unlikely the group will convene before its scheduled meeting on March 15, he said.

The cutback is from OPEC’s September production levels and includes a reduction that took effect Nov. 1. The group agreed to a record cut of 2.46 million barrels a day at a meeting in Oran, Algeria, on Dec. 17. OPEC produces more than 40 percent of the world’s oil.

Abu Dhabi Cuts

Abu Dhabi National Oil Co., the United Arab Emirates state- owned producer, said on Dec. 26 that it would cut its shipments of crude sold to Asian under long-term contracts by up to 15 percent for some grades in January and February. The country was OPEC’s fourth-largest producer in November.

Brent crude oil for February settlement was at $49.30 a barrel, down 32 cents, on London’s ICE Futures Europe exchange at 9 a.m. Singapore time. The contract yesterday added $2.71, or 5.8 percent, to $49.62 a barrel.

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