“Oil is gaining on OPEC talks,” said Phil Flynn, of Alaron Trading. “The pending home sales also give hope to the market that the economy can recover.”

OPEC’s 11 members bound by output targets pumped 26.23 million barrels a day of oil in January, down from 27.24 million in December, analysts found. But that was higher than their target of 24.84 million that took effect on January 1.

Saudi Arabia, OPEC’s top producer, did reduce supply by 230,000 barrels a day, to bring its output slightly below its implied target. Struggling Venezuela, though, lowered supply by less than its projected cutback.

Perhaps a bit wryly, Flynn added that, “Oil bulls latch on to every ray of economic sunshine they can in these cloudy economic times.”

Source: Oil A Bit Higher

Oil, which had been on a tear that took it above $48 on January 26, largely due to OPEC production cuts, is back in the doldrums again.

“OPEC’s compliance continues to be impressive but may be prolonging their own economic pain by creating more demand destruction,” said Phil Flynn, of Alaron Trading.

And Edward Meir, of MF Global (NYSE:MF), wrote that, “The bearish macro backdrop should cap any sharp rallies above $50, while the OPEC cutbacks seem to have stopped — at least for now — the worst of the recent downward spiral … Of the two variables, the macro element is by far the more important.”

Elsewhere, the United Steelworkers union agreed to extend talks on a new contract for thousands of workers at U.S. refineries, thereby avoiding a strike, at least for the moment.

Source: Crude Drops

As commodities rose across the board, with the Reuters/Jefferies CRB Index rising 3.3%, oil benefited as well.

“People are running out of Treasurys and moving into the commodities as a safe haven, because they are wondering what will be the next shoe to drop,” said Phil Flynn, of Alaron Trading.

Also factoring in was data a report from Petrologistics, which estimated that OPEC’s oil supply, excluding Iraq, will decline by 1.55 million barrels per day in January.

And some traders are still hoarding crude. Inventory levels at Cushing, Okla. — the delivery point for oil futures used on the New York Mercantile Exchange — rose 200,000 barrels to reach a record 33.2 million barrels.

Source: Oil Cuts Losses And Moves Higher

The day’s volatility was largely due to the contract expiration, with “a lot of last-minute positioning,” said Phil Flynn, of Alaron Trading.

There was some Obama-related optimism in the market, with Edward Meir, of MF Global (NYSE:MF), remarking that, “Markets might start to stabilize as they tee off the fact that a new administration is now solely in charge of policy, and will likely usher in much more radical measures to confront the macro crisis at hand.”

And in some good news from across the pond, Russian gas delivery to Europe via Ukraine was finally re-started after a 13-day disruption, as Russia and Ukraine reached a resolution to their energy dispute.

Source: Crude Erases Early Losses

Crude is picking up some momentum “on news that Saudi production cuts will exceed their quota in February,” said Phil Flynn, of Alaron Trading.

Flynn referred to remarks by Saudi Arabian Oil Minister Ali Naimi, who said that country will cut its February production by more than the target. Naimi left open the possibility that the Saudis will further cut production in March.

“We are working very hard to bring markets in balance,” Naimi said. “We will do whatever it takes to bring them back in balance.”

And the Energy Information Administration said yesterday in its monthly report 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.

Source: Crude Barely Moves

“The first attempt against the $50 psychological level is keeping a lid on this market,” said Burton Schlichter, of New World Trading.

But Phil Flynn, of Alaron Trading, was blunter. “Oil is running out of steam because at the end of the day the global crises have not cost the globe one drop of oil,” Flynn said.

Yet, one might add, as supply cuts haven’t really kicked in. Iran and Kuwait said they will deepen curbs on supplies to customers this month, joining OPEC peers in cutting back output, Reuters reported.

Source: Crude Little Changed

Analysts cited a convergence of factors, including a Russian move to cut off natural gas to Ukraine, the ongoing conflict in the Middle East, and OPEC’s projected production cuts.

“A new mood has greeted the early days of 2009 and one that is not so gloomy,” said Phil Flynn, of Alaron Trading.

The Energy Department provided a boost, too, saying yesterday that it will take advantage of low oil prices to buy oil for the 727 million-barrel Strategic Petroleum Reserve, and fill it in 2009. The energy agency said it has issued a solicitation to buy about 12 million barrels of crude oil for the reserve, to replenish supplies sold after hurricanes Katrina and Rita in 2005.

Source: Crude Rallies

Despite the prospect of production cuts from OPEC tomorrow, the oil market “is doubting that OPEC can do what they say they will do,” said Phil Flynn, of Alaron Trading. Besides, he added, “The market is [also] saying that even if OPEC can cut production, in a slowing economy will anyone buy it?”

Nimit Khamar, an analyst at Sucden Financial, wrote that a 2 million barrel cut may be in the cards. “OPEC needs to show their commitment to bringing markets back in equilibrium and prevent a supply glut,” Khamar said. Less than that “may not be enough to calm markets and prevent prices falling back towards recent lows.”

Russia, which isn’t an OPEC member, will attend the cartel’s meeting this week as an observer. It is expected to follow up on the OPEC meeting by announcing a concurrent cut in Russian production.

Source: Crude Slips Lower

Traders were wary of the potential of soon-to-be Hurricane Gustav, but in the end apparently minimized the threat.

As James Williams, of WTRG Economics, pointed out, the impact of hurricanes on oil can be minimal. For example, “During the back-to-back hurricanes in 2005, spot oil prices only moved 7% on Katrina and 3% with Rita — and in both cases ended lower in less than two weeks,” Williams wrote.

Traders were also reassured by word from the International Energy Agency and the U.S. government said they stand ready to release oil from emergency reserves if Tropical Storm Gustav disrupts U.S. oil production.

And Phil Flynn, of Alaron Trading, said that, “If demand for oil was strong right now, I think the markets would be more nervous” but “the oil that is expected to be shut [from Gustav] is 1.2 million barrels — which is about the same amount demand is off from a year ago.”

However, as the Labor Day holiday looms, “Given the thin trading conditions that are bound to set in over the next two days, we could see a rather substantial move higher, as both fresh buying and short-covering sets in ahead of the long weekend,” wrote Edward Meir, of MF Global (NYSE:MF).

Source: Crude Retreats

Some cited a perception that international tensions may be easing, while others pointed to the rally in the dollar.

But who really knows? Phil Flynn, of Alaron Trading, may have caught the mood when he said, “It is all about oil-perceived value against a backdrop of uncertainty and a world and economic system gone wild.”

At least there’s some good news at the pump, as the national average price for a gallon of regular gasoline stood at $3.692 on Friday, down from $3.702 a day earlier, and $4.042 a month ago, according to AAA’s Daily Fuel Gauge Report.

And, as always this time of year, traders are keeping a wary eye on developed or potential hurricanes.

Source: Bottom Falls Out of Crude