Oil Rises as OPEC Cuts Supply, U.S. Slows Less Than Forecast

By Grant Smith

Jan. 30 (Bloomberg) -- Crude oil rose as OPEC implemented supply cuts announced last month while signaling it may make more, and after a reported showed the U.S. economy contracted less than forecast in the fourth quarter.

Gross domestic product in the U.S., the world’s biggest energy user, shrank at a 3.8 percent annual pace, the Commerce Department said today in Washington, less than an expected 5.5 percent. The Organization of Petroleum Exporting Countries won’t hesitate to cut output further if prices keep falling, Secretary General Abdalla el-Badri said at the World Economic Forum yesterday.

“Over the short term, the next month or two, we see crude oil prices pushing to the $50-$55 level,” said Edward Meir, an analyst at MF Global in Connecticut. “The markets seem to be giving OPEC the benefit of the doubt, which explains why prices have been holding above the $40 mark.”

Crude oil for March delivery rose as much as 85 cents, or 2.1 percent, to $42.29 a barrel on the New York Mercantile Exchange and traded at $42.23 at 1:45 p.m. London time. Prices are heading for a 10 percent decline this week and are down 7.2 percent in January, the seventh straight monthly decline.

“There’s been so much weak economic data, demand is probably going to weaken further,” said Helen Henton, head of commodity research at Standard Chartered Plc in London. “At the same time there’s a recognition OPEC has stepped up and done what it needs to do.”

Labor Unrest

Brent crude oil for March settlement was at $46.62 a barrel, up $1.22, on London’s ICE Futures Europe exchange at 1:42 p.m. London time. It yesterday rose 50 cents, or 1.1 percent, to end the session at $45.40 a barrel.

Labor unrest in the refining industry has also bolstered prices in the past day. The United Steelworkers union may reject the third contract offer from Royal Dutch Shell Plc covering workers at U.S. refineries with almost two-thirds of the country’s capacity. The current agreement expires Feb. 1.

In the U.K., workers at Ineos Group Holdings Plc’s Grangemouth refinery in Scotland walked out as protests against foreign employees at Total SA’s Lindsey refinery spread, the BBC reported today. As many as 300 people took part in the Grangemouth action, the report said.

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