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Oil dips to near $43 as investors eye OPEC cuts
(Agencies)
Updated: 2008-12-09 17:23 SINGAPORE _ Oil prices slipped to near $43 a barrel Tuesday in Asia as investors anticipated that OPEC will announce a big production cut next week to stabilize crude prices that have fallen about 70 percent in five months.
Light, sweet crude for January delivery was down 35 cents to $43.36 a barrel on the New York Mercantile Exchange by late afternoon in Singapore. The contract fell overnight $2.90 to settle at $43.71. Prices fell last week to an intraday low of $40.50, the lowest since December 2004. "Oil should find support around $40 a barrel and should form a bottom there," said Aaron Smith, who helps manage about $1.7 billion as managing director at Superfund Financial in Singapore. Smith, who uses technical analysis to help guide his investment decisions, has recently reduced bets that the price of oil will go down, known as shorting. "We've reduced the size of our short positions in oil dramatically over the last couple months," said Smith, who invests half his fund in commodity futures contracts. "But if it breaches that $40-$41 level, it could really keep moving." Investors are watching for signs of how much the Organization of Petroleum Exporting Countries may reduce output quotas at the group's meeting next week in Algeria. OPEC President Chakib Khelil said Saturday the group could announce a "severe" production cut and suggested the cartel could seek to surprise the market with the size of the reduction in a bid to bolster prices. OPEC, which controls about 40 percent of world crude supplies, announced a production cut of 1.5 million barrels a day in October and 500,000 barrels in September, moves investors brushed off as a global economic slowdown worsened. OPEC will have to adhere to any promised output cut if it hopes to help reverse the fall in oil prices, said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "I think OPEC will need to make a cut of at least 2 million barrels a day," Shum said. "I think pricing going down to $40 last week will galvanize OPEC to make a substantial cut and comply better with their targets." "But you can announce all the cuts you want. Compliance is the key." Investors were also encouraged by news that President-elect Barack Obama plans to implement a major infrastructure program to help boost employment in the weakening US economy. "With all the stimulus packages and output cuts by OPEC, we may see the oil price stabilizing," Shum said. In other Nymex trading, gasoline futures was little changed at 96.25 cents a gallon. Heating oil gained 1.03 cent to $1.5007 a gallon while natural gas for January delivery rose 8.6 cents to 5.65 per 1,000 cubic feet. In London, January Brent crude fell 34 cents to $43.08 on the ICE Futures exchange. |
