MARKET WATCH: Oil prices rebound before OPEC meeting

Crude oil futures prices rebounded Dec. 8 from the previous trading session's 4-year lows on NYMEX.

Dec 9th, 2008

Paula Dittrick
Senior Staff Writer

HOUSTON, Dec. 9 -- Crude oil futures prices rebounded Dec. 8 from the previous trading session's 4-year lows on the New York Mercantile Exchange. The January contract for benchmark US light, sweet crudes rose above $43/bbl.

Rising oil prices came in anticipation that the Organization of the Petroleum Exporting Countries might announce substantial cuts in production quotas during a scheduled meeting Dec. 17 in Algeria.

OPEC Pres. Chakib Khelil on Dec. 6 suggested the cartel could announce a "severe" cut in production quotas, although he did not specify a figure. Some analysts believe Khelil will suggest a 2 million b/d production cut.

Khelil told Associated Press that oil prices could be bolstered if OPEC announces a quota reduction that startles markets. "The best way is to surprise them," Khelil said. "I hope it will."

James L. Williams of WTRG Economics said a 2 million b/d cut would not be enough to raise oil prices to $70/bbl or higher. He believes OPEC would have to announce a cut of at least 3 million b/d, effective by Feb. 28.

"OPEC has a poor record of defending prices during recession or financial crisis," Williams said." If it is to succeed, the cuts must be deep and compliance high."

Energy prices
The January contract for benchmark US light, sweet crudes rose $2.90 to $43.71/bbl. The February contract rose $3.43 to $46.36/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $2.90 to $43.71/bbl.

Heating oil for January delivery rose 6.39¢ to $1.49/gal on NYMEX. The January contract for reformulated blend stock for oxygenate blending (RBOB) rose 6¢ to 96¢/gal.

Natural gas for the same month dropped 1.76¢ to $5.56/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., lost 31¢ to $5.66/MMbtu.

In London, the January IPE contract for North Sea Brent crude was up $3.68 to $43.42/bbl. The December gas oil contract was up $8.75 to $445.75/tonne.

The price of OPEC basket of crudes stood at $37.54/bbl on Dec. 8 compared with $36.67/bbl on Dec. 5, the OPEC Secretariat reported.

Contact Paula Dittrick at paulad@ogjonline.com.

More in General Interest