Oil falls before OPEC discusses output cut to stem price slump

November 29, 2008 - 0:0

SINGAPORE (Bloomberg) -- Crude oil fell on speculation OPEC won’t be able to halt the slide in prices as the global recession cuts fuel demand.

The Organization of Petroleum Exporting Countries may consider a reduction at its meeting this weekend in Cairo to stabilize the market, Shokri Ghanem, the chairman of Libya’s National Oil Corp., said on Thursday. Prices have slumped 63 percent from a record $147.27 a barrel on July 11 as demand falls around the world. Economic reports this week showed a deepening recession in the U.S., the world’s largest oil user.
“OPEC is aware that the market is not so concerned about the production side as it is about demand,” said Eugen Weinberg, a Commerzbank AG analyst in Frankfurt. “There is lots and lots of pressure on the market and that is weighing on the price.”
Crude oil for January delivery dropped $1.24, or 2.3 percent, to $53.20 a barrel at 10:18 a.m. London time in electronic trading on the New York Mercantile Exchange. Nymex was open only for electronic trading on Thursday because of the U.S. Thanksgiving holiday. Futures closed at $54.44 on Nov. 26 after rising 7.2 percent.
Concerns about oil consumption have increased after reports showed the U.S. economy slowed and consumer spending fell. Gasoline demand dropped 1.3 percent from last week, the Energy Department said in its weekly report on Nov. 26.
-------------------Consumer slump
Consumer spending slumped the most in seven years and orders for durable goods including refrigerators and washing machines declined twice as much as forecast, the Commerce Department said Nov. 26.
Brent crude oil for January settlement fell as much as 98 cents, or 1.8 percent, to $52.15 a barrel on London’s ICE Futures Europe exchange. It was at $52.40 a barrel at 9:54 a.m. London time. Prices declined 1.5 percent on Thursday.
Ministers from OPEC, which supplies 40 percent of the world’s oil, are meeting tomorrow for the third time in as many months to discuss a further cut in production.
OPEC decided last month to reduce supply quotas by 1.5 million barrels a day. The Cairo meeting, originally intended just for ministers from Arab nations, was expanded into a full OPEC meeting to include Venezuela, Iran and Angola.
The crude oil market is over-supplied, OPEC Secretary- General Abdalla el-Badri said on Thursday in an interview in Cairo. He declined to recommend a course of action, saying any decision concerning production quotas was up to ministers.
------------------------‘Exorcise surplus’
“They might say that they will cut 1 million barrels but in reality the market knows maybe they’ll cut 500,000 to 600,000 barrels,” Stephen Schork, president of Schork Group Inc. in Villanova, Pennsylvania, said in a Bloomberg Television interview. “And that’s simply not enough to exorcise the surplus out of the market.”
Daily shipments of oil from OPEC will fall 1.6 percent in the four weeks to Dec. 13, said industry consultant Oil Movements. The group will load 24 million barrels a day in the period, down from 24.38 million barrels a day.
Fourteen of 38 analysts surveyed by Bloomberg News, or 36 percent, said oil prices will decline through Dec. 5. Twelve respondents, or 32 percent, said oil will rise and 12 forecast oil will be little changed.