SINGAPORE (AP) - Oil hovered near $47 a barrel Tuesday in Asia
after OPEC signaled it will likely announce another production cut
on Sunday, adding to large supply reductions the cartel has already
Benchmark crude for April delivery fell 11 cents to $46.96 a
barrel by midday in Singapore on the New York Mercantile Exchange.
Oil prices gained $1.55 on Monday to settle at $47.07.
Leaders of the Organization of Petroleum Exporting Countries
have suggested for weeks that the group may cut output quotas at
its next meeting on March 15 in Vienna.
On Monday, Kuwaiti Supreme Petroleum Council member Moussa
Marafi told the Kuwait News Agency that an OPEC production cut of a
million barrels a day would raise prices to over $50 a barrel by
the third quarter of 2009.
Marafi said OPEC compliance with the 4.2 million barrels a day
of cuts announced since September has been "very high" at 80
percent and would reach 90 percent by the time the group meets
Investors expect OPEC to announce fresh production cuts of
between 500,000 and 1 million barrels a day, said Clarence Chu, a
trader with market maker Hudson Capital Energy in Singapore.
"If the cut exceeds expectations, there would be a short-term
pop in prices," Chu said. "But it will take months for the cut to
affect supplies in the U.S. It's not an overnight thing."
Iraqi Oil Minister Hussain al-Shahristani said Monday on
Sharqiyah television station that oil prices were too low and OPEC
is working to "inch them up."
Investors largely brushed off OPEC's output cut announcements
for months, doubting whether the 12-member group would have the
discipline to implement the output reductions. But OPEC has
complied with most of the cuts, earning back some credibility, Chu
"Everybody used to produce over quota, and OPEC lost
credibility," Chu said. "According to Game Theory, cartels don't
work because each member gains from cheating."
"But with prices so low, they've had to cooperate."
Oil prices have fallen from $147 a barrel in July as crude
demand plummeted amid the worst global economic slump in decades.
Prices won't likely jump higher until the U.S. economy stabilizes
and crude demand increases, Chu said.
"The bad economic news won't go away for a while," Chu said.
"But demand should pick up by the end of the year and I see prices
drifting toward $55 a barrel in the second half."
In other Nymex trading, gasoline for April delivery was steady
at $1.36 a gallon, while heating oil was little changed at $1.22 a
gallon. Natural gas for April delivery was steady at $3.86 per
1,000 cubic feet.
Brent prices rose 26 cents to $44.39 on the ICE Futures exchange