Monday December 15, 2008

NYMEX crude oil rises to $50 as OPEC says sizable production cut needed

bloomberg.com :

Crude oil prices rose, touching $50 on NYMEX, after OPEC's Secretary-General Abdalla El-Badri said the group needs to make a "sizable" production cut at this week's meeting in Algeria. OPEC which pumps 42% of the world's oil, will probably lower output targets by at least 2 million barrels a day, or 7.3%, at a Dec. 17 meeting in Oran. Crude oil for Jan 2009 delivery rose as much as $3.77 to $50.05 a barrel in electronic trading on the New York Mercantile Exchange.

OPEC is asking Russia, the largest producer outside the group, to cut oil output by between 200,000 and 300,000 barrels a day to help revive prices, OAO Lukoil Chief Executive Officer Vagit Alekperov said in Moscow today [15 Dec 2008]. Oil has fallen more than $100 a barrel from July's $147.27 record as the global economic slump cuts fuel consumption.

- With all this production cut talk likely being priced in already, if OPEC cuts less than 2 million barrels per day, there will be disappointment and a return to the $40 level. Everyone is looking at China demand, but with 67,000 factories closed in the first half of 2008 and the figure reportedly over 100,000 already, that is pretty much in doubt.

The game is up if the global economy contracts faster than IEA's reported 9.1% oil depletion rate. That would be Second Great Depression territory. Some say we are already there. And that the only thing that the OPEC production cut would do is to stabilize prices in the $40-50 range that's all. We'll see.

See also :

1. NYMEX crude oil drops below $60 on demand destruction concerns
2. NYMEX crude oil drops below $50 on global economic slowdown
3. Peak Oil : IEA reports global depletion rate could go up to 9.1%, struggle to produce crude oil
4. Global credit crisis slows food and energy shipments, may lead to shortages
5. NYMEX crude oil falls more than $100 from Jul 2008 record on US recession, OPEC production cut delay

(2008-12-15 23:37:32 SGT) [Energy] Permalink

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