Crude rises after five days of drop

Production cut talks by OPEC boost prices

After dropping in the previous five sessions, crude oil prices ended higher on Tuesday, 13 January, 2009. Prices rose as Saudi Arabia said that OPEC will go for production cuts more than required to boost crude prices.

On Tuesday, crude-oil futures for light sweet crude for February delivery closed at $37.78/barrel (higher by $0.19 or 0.5%) on the New York Mercantile Exchange. Earlier during the day, prices fell to a low of $36.1 and rose to a high of $40.55. Last week, crude prices shed 12%.

Prices reached a high of $147 on 11 July but have dropped almost 65% since then. Year to date, in 2009, crude prices are lower by 16.2%.

In the monthly report, the Energy Information Administration said today that global oil consumption is projected to fall by 800,000 barrels per day in 2009. That's 400,000 barrels more than the previous month's forecast. Half of the consumption reduction in 2009 will come from the U.S., the world's largest oil consumer,

Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.

OPEC has been trying to cut production consistently in order to step up prices from their current low levels.

Saudi Oil Minister Ali al-Naimi said today that February production will be “lower than the target” set at a 17 December, 2008 OPEC meeting. The country is currently producing 8 million barrels a day, about level with its 8.051 million-barrel-a-day allocation.

Oil ministers from the Organization of Petroleum Exporting Countries agreed in Oran, Algeria, to cut supply by 9% w.e.f 1January, 2009 to 24.845 million barrels a day.

Against this background, February reformulated gasoline rose 6% to $1.1489 a gallon and February heating oil gained 2.8% to $1.5141 a gallon.

February natural-gas futures fell 5.1% to $5.26 per million British thermal units.

At the MCX, crude oil for January delivery closed at Rs 1,850/barrel, lower by Rs 9 (0.5%) against previous day's close. Natural gas for January delivery closed at Rs 259.1/mmbtu, lower by Rs 15.3/mmbtu (5.6%).