MARKET WATCH: Oil futures price rally on volatile market
Oil futures prices rallied Dec. 10 on NYMEX on indications that OPEC is planning to reduce production quotas at its upcoming meeting.
Senior Staff Writer
HOUSTON, Dec. 11 -- Oil futures prices rallied Dec. 10 on the New York Mercantile Exchange on indications that the Organization of Petroleum Exporting Countries is planning to reduce production quotas at its upcoming meeting.
Reuters reports Saudi Arabia has told its biggest customers that they will receive significantly less crude. Analysts said this indicates that OPEC likely will agree on a cut, possibly 2 million b/d, at its Dec. 17 meeting in Algeria.
"In our view, in OPEC's meeting next week, using a worst-case scenario for demand and non-OPEC supply, it is possible that OPEC cuts by 1.5 or 2 million b/d," Barclays Capital analysts said, adding that "cuts as large as those would appear warranted."
Outside OPEC, Russia's Energy Minister Sergei Shmatko said Russia will announce plans to cut its oil production by the time OPEC next meets. Russia will attend the OPEC meeting as an observer.
Speaking Dec. 10 at the Deloitte energy conference north of Houston, Amy Jaffe of Rice University's Baker Institute noted that a Russian delegation also attended a recent OPEC meeting.
"It's a really interesting time now for the Russians in a lower price environment." Jaffe said.
The International Energy Agency's monthly Oil Market Report, released Dec. 11, showed a downward revision in the global oil demand forecast from the numbers that IEA issued in November. This would be the first time since 1983 that global oil demand has shrunk from the previous year.
IEA now expects 2008 global oil demand of 85.8 million b/d, a 200,000 b/d year-on-year decline. IEA expects demand to rebound in 2009 to 86.3 million b/d.
This forecast contrasts with the US Energy Information Administration, which forecast consumption will fall by 450,000 b/d next year.
The January contract for benchmark US light, sweet crudes rose $1.45 to $43.52/bbl. The February contract climbed $1.36 to $46.02/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.45 to $43.52/bbl.
Heating oil for January delivery dropped 3.42¢ to $1.40/gal on NYMEX. The January contract for reformulated blend stock for oxygenate blending (RBOB) gained 3.23¢ to 96.87¢/gal.
Natural gas for the same month rose 10.7¢ to $5.686/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., held steady at $5.70/MMbtu.
In London, the January IPE contract for North Sea Brent crude was up 87¢ to $42.40/bbl. The December gas oil contract was down $12 to $429.25/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 13 reference crudes lost 28¢ on Dec. 10 to close at $37.94/bbl.
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