Oil rises above US$67 as investors look to OPEC production cut

Source: Agencies  |   2008-10-24  |     ONLINE EDITION

OIL prices swung back above US$67 a barrel yesterday, rebounding from a 16-month low as OPEC members met to decide whether to slash production to halt crude's slide.

Members of the Organization of the Petroleum Exporting Countries were gathering in the Austrian capital of Vienna ahead of official talks Friday. Iranian oil minister Gholam Hossein Nozari called on the cartel to cut by 2 million barrels a day to stop a steep slide that has left prices more than 50 percent lower than their peak of US$147.27 hit July 11. Venezuela also called for quick action to shore up falling prices.

Other OPEC members were more cautious. Oil ministers from Kuwait and Algeria said a production of any size should be done in a way that doesn't bring more turmoil to already fragile global economies.

David Kirsch, an energy markets analyst at Washington-based PFC Energy, said he believes the market has already factored in a 1 million barrel a day cut, which means prices wouldn't change much in the short-term if OPEC reduces output by that much.

"I think most of the ministers are not really focused on the short-term price. They're making sure the underlying fundamentals don't get out of hand and they don't see a supply glut next year," Kirsch said from Vienna.

Light, sweet crude for December delivery rose US$1.09 to settle at US$67.84 a barrel on the New York Mercantile Exchange. Earlier, oil dropped as low as US$65.90, the lowest trading level since June 13, 2007. On Wednesday, the contract fell US$5.43 to settle at US$66.75 a barrel.

Crude has lost nearly US$40 in the past month alone.

Kirsch said OPEC could stagger the cuts over time to smooth out the impact on markets.

"I think they recognize that over time they will have to cut again, but I don't think there's a lot of support for 2 million barrel a day cut" all at once, he said.