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Oil up more than $1 before expected OPEC supply cut

(Agencies)
Updated: 2008-12-17 19:36

LONDON -- Oil rose by more than a dollar to nearly $45 on Wednesday ahead of an OPEC meeting in Algeria widely expected to announce a big cut in production in an attempt to halt a collapse in oil prices.

OPEC President Chakib Khelil is seen arriving for a news conference after a meeting of OPEC oil ministers in Vienna in this September 10, 2008 file photo. Oil rose by more than a dollar to nearly $45 on Wednesday ahead of an OPEC meeting in Algeria widely expected to announce a big cut in production in an attempt to halt a collapse in oil prices. [Agencies]

Related readings:  Oil prices steady at $44 ahead of OPEC meeting  OPEC ready to cut oil output as prices dive  Oil reaches $49 ahead of OPEC meeting  Oil steady near $46 as OPEC prepares output cut

A tumbling US dollar after a bigger-than-expected cut in interest rates by the US Federal Reserve also helped oil.

Oil ministers from the Organization of the Petroleum Exporting Countries appeared to be near consensus on a cut in output of 2 million barrels per day (bpd), the biggest ever reduction ever by the producer group.

US light crude for January delivery, due to expire on Friday, rose $1.39 to $44.99 a barrel by 0855 GMT after having fallen to a low of $42.56 in the previous session, just off a four-year trough of $40.50 a barrel hit on December 5.

London Brent crude for February delivery was up $1.61 at $48.26.

Oil prices have tumbled more than $100 from the July all-time record above $147 a barrel as financial turmoil has slowed global economic growth and hit fuel demand.

OPEC is desperate to halt the slide in prices. Economists say that at $40 per barrel, 11 of OPEC's 12 members, as well as Russia and Mexico, face budget deficits.

But a large cut has been widely flagged by oil ministers and dealers say the move has already been priced into the market.

"Sell the Fact"

"A 2.0 million bpd cut in production now runs the risk of a 'Buy the rumour, Sell the fact' scenario," Rob Laughlin, analyst at MF Global said. "It would have been bullish for the market a week ago. But we have been warned to expect it now so I think the market will go up initially but then come down further."

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