Crude Oil Surges; OPEC to Make ‘Severe’ Cut
Crude oil futures jumped to near $48 a barrel on Thursday trading in New York, after the president of OPEC called for ‘severe’ production cuts and the dollar reached a seven-week low against the euro.
U.S. light, sweet crude traded $4.46 higher, or 10.25 percent, settling at $47.98 a barrel, continuing a rebound from near four-year lows hit last week.
London Brent crude settled at $47.39, up $4.99.
“The Oran meeting will decide a severe production cut to stabilize the oil market,” OPEC President Chakib Khelil, who is also Algeria’s oil minister, said in an interview on state radio today. “There is a consensus to reduce production.”
The next OPEC meeting is scheduled for Dec. 17 in Algeria, and is widely expected to bring a massive cut in production.
The announcement that the Russians, a non-OPEC nation, will also be cutting production is another variable which is pushing the price of crude higher.
Russia is attending the OPEC meeting as an observer and has said that they will present their own proposals to the oil cartel.
Expectations are for OPEC to reduce production by 1.5 million barrels per day, while Russia will cut 500,000 on its own, according to Phil Flynn, Energy Analyst at Alaron Trading Corp.
The U.S. dollar weakened after weekly employment data came in worse than expected. A weak dollar generally will boost investor demand for oil and other dollar-denominated commodities.
OPEC, the supplier of 40 percent of the world’s crude, last cut production on Oct. 24 by 1.5 million barrel per day.
A report released today by the International Energy Agency said that consumption worldwide will shrink in 2008 by 200,000 barrels a day, but should rebound in 2009. Next year’s growth may be wiped out if the economic slump deepens, the agency said.