Oil rises to US$73 on expectation of Opec cut (4:15 p.m.)
SINGAPORE — Oil prices rose to US$73 a barrel in Asia on Monday on expectations that Opec will cut production quotas at an extraordinary meeting later this week.
Light, sweet crude for November delivery rose US$2.09 to $73.94 a barrel in electronic trading on the New York Mercantile Exchange by mid-afternoon in Singapore. The contract Friday gained US$1.53 to settle at US$71.38.
Chakib Khelil, president of the Organization of Petroleum Exporting Countries, said Sunday that members plan to announce a “substantial” cut at a meeting that begins October 24 in Vienna.
Khelil, who is also Algeria’s energy minister, said Opec may cut output again at a meeting in December, and that the group considers the oil market oversupplied by about two million barrels a day, Khelil said.
Venezuelan President Hugo Chavez said Sunday he would like prices between US$80 and US$90 a barrel.
“The market is factoring in a big cut. It will likely be as much as 2 million barrels,” said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne. “I think they will go pretty large just to change the sentiment.”
Investors largely ignored an Opec output reduction of about 520,000 barrels a day last month, focusing instead on weakening demand.
Fears that turmoil in global financial markets will spark an economic slowdown in developed countries has helped push prices down from a record US$147.27 in July.
Last week, news of rising US oil inventories, falling retail sales and slowing housing starts fueled concerns that the world’s largest economy may face a major recession that will undermine demand for crude.
“Oil demand in the US will be a bellwether,” Pervan said.
“If the US, Europe and Japan go into a major recession, there’s no reason we can’t see US$35, US$40 a barrel.”
In other Nymex trading, heating oil futures rose 4.41 cents to US$2.18 a gallon, while gasoline prices gained 5.39 cents to US$1.72 a gallon. Natural gas for November delivery jumped 14.9 cents to US$6.94 per 1,000 cubic feet.
In London, November Brent crude was up US$1.20 to US$70.80 a barrel on the ICE Futures exchange. (AP)
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