Oil held around $40 a barrel on Thursday after U.S. crude stocks swelled to an 18-month high and investors anticipated more bleak economic data out of the world’s biggest fuel consumer.

The outlook for more huge job losses in the United States darkened the demand prospects there.

A global financial slowdown has cut demand and swollen fuel stocks, knocking more than $100 a barrel off the price of crude since its July 2008 peak of $147.

U.S. crude inventories jumped by 7.2 million barrels to an 18-month high last week, data from the U.S. Energy Information Administration showed, twice what analysts expected and the sixth straight weekly rise.

U.S. light crude for March delivery ticked up 2 cents to $40.34 a barrel at 1019 GMT, about $4 below London Brent crude for the same month, which gained 30 cents to trade at $44.45 a barrel.

U.S. crude has been locked between $39 and $49 a barrel for the past two weeks.

“Crude oil markets still seem to be trapped within a trading range, as market anticipation about OPEC cuts — both current and pending — is keeping something of a floor below prices,” MF Global said in a report.

“…The upside is capped by lingering concerns over the macro situation.”

Oil losses have been limited by signals this week from the Organization of the Petroleum Exporting Countries that it may cut oil production further in an attempt to bolster the market.

OPEC, worried that the global economic downturn is reducing oil demand and pressuring prices, has promised to reduce oil production by a total of 4.2 million barrels per day (bpd) from levels seen in September.

LONDON, Feb 5 (Reuters)

Stocks of distillates grew by 6.4 million barrels last week amid weak demand, while crude and gasoline inventories also rose, the Energy Information Administration said.

“Inventories continue to build. This morning we had negative sales numbers. This is more economic weakness affecting demand,” said Tom Bentz of BNP Paribas Commodity Futures in New York.

U.S. crude was down $2.08 at $35.70 a barrel by 1618 GMT after earlier hitting a high of $39.45. London Brent crude fell 88 cents to $43.95 a barrel.

The inventory report added further pressure to prices after weak U.S. retail sales data sparked selling earlier in the session.

The U.S. Commerce Department said total retail sales fell 2.7 percent to a seasonally adjusted $343.2 billion last month. Analysts polled by Reuters had forecast December retail sales falling 1.2 percent.

“The retail sales figures are horrible. They confirm that the United States is in recession, which means oil demand is falling and so the market is weakening,” said Rob Laughlin, senior oil analyst at MF Global.

The global financial crisis, the worst since the 1930s, has pushed much of the industrialised world into recession, causing oil demand to slump and crude prices to tumble by more than $100 from its record peak of above $147 a barrel last July.

Oil producers in the Organization of the Petroleum Exporting Countries have responded to the recession by cutting output.

Top exporter Saudi Arabia said on Tuesday it was prepared to go even further than cuts it had made since December if the market warranted it, while OPEC’s secretary general said the group may reduce oil output again at its meeting in March.

Libya’s top oil official said on Wednesday OPEC’s existing oil output cuts should support oil prices and that it was too early to tell if a further production reduction.

OPEC decided to cut supply by 2 million bpd at meetings in September and October. In December, it agreed to lower output by a further 2.2 million bpd as of Jan. 1, a record reduction.

So far OPEC’s moves have had little obvious impact on the market and oil for prompt delivery is trading at a big discount to future barrels with the market in what is called a contango.

The front-month U.S. crude contract is also at a record discount to North Sea Brent crude futures with a spread of nore than $8 a barrel between the two contracts.

LONDON, Jan 14 (Reuters)

Oil fell more than $2 to below $39 a barrel on Monday, dragged down by widespread evidence that deepening recession was reducing global energy consumption.

The decline came despite news that Saudi Arabia planned to cut output to below its agreed target, as well as gas supply disruptions in Europe as a result of the Russia-Ukraine dispute and tensions in the Middle East.

U.S. light crude for February delivery fell $2.18 to a low of $38.65 by 1020 GMT. London Brent crude fell $1.62 to $42.80.

U.S. jobless data on Friday set the tone for the market.

A U.S. government report showed employers slashed jobs by 524,000 in December, driving the national unemployment rate to its highest level in almost 16 years.

“The U.S. unemployment numbers on Friday started the latest leg downwards. We have had a string of bad news, with companies and economies all reporting negative data. It is almost relentlessly bad,” said Rob Laughlin, senior oil analyst at MF Global in London.

Oil prices fell 54 percent last year and have shed more than $100 from a record peak of above $147 a barrel last July as the global economic downturn hits demand for fuel.

SUPPLY CUTS

The world’s top oil exporter, Saudi Arabia, plans to cut output by up to 300,000 barrels per day (bpd) below its agreed OPEC target, a proactive step to prop up a collapsing market, industry sources said on Sunday.

Riyadh has already lowered supply this month to 8 million bpd, meeting its target under OPEC’s pact to reduce overall supplies by a record amount from Jan. 1.

Saudi Arabia’s cutbacks add to similar moves earlier this month by other OPEC producers including Iran, the United Arab Emirates, Kuwait and Libya to curb supplies, although evidence that oil producers are cutting output has not lent much support to prices so far.

Iran’s representative to OPEC was quoted as saying that the group could decide to reduce oil output again at its meeting in March if crude prices fell further.

The front months on oil futures have been taking the brunt of the falls with the markets is steep contango. March U.S. crude futures have been trading at a premium of more than $5 above February, while April is around $3 above March.

Traders say the wide price spread partly reflects a lack of prompt demand but also a view that OPEC cuts will eventually start to impact the market and support prices.

Also worrying the oil market was the status of a deal to restore Russian gas supplies via Ukraine to Europe.

In the Middle East, Israel leaders trying to find a knockout blow for Hamas militants defying a 17-day-old assault have thrown army reservists into the battle.

Although the Russian-Ukrainian gas price row and Middle East tensions could help push oil prices higher, analysts said any rebound was expected to be short lived.

Goldman Sachs Commodities said in a research note on Friday that a market surplus was expected to continue to drive inventories higher and put pressure on its forecast oil price of $30 a barrel for the first quarter of 2009.

LONDON, Jan 12 (Reuters)

Oil topped $50 a barrel on Monday, boosted partly by expectations OPEC will agree on a deep supply cut this week to try to prop up prices.

A weaker dollar also lent support to oil, which has fallen about $100 from a record high of more than $147 in July, as the global financial crisis has hit demand for fuel.

Goldman Sachs has predicted oil could go as low as $30.

U.S. light crude for January delivery rose to as high as $50.50, topping the $50 line for the first time since early December. It was trading $3.00 up at $49.28 by 1421 GMT.

It has rebounded by more than 20 percent from a 4-year low of $40.50 a barrel on Dec. 5.

London Brent crude gained $2.89 to $49.30.

Members of the Organization of the Petroleum Exporting Countries are in agreement on the need to cut output when they meet on Wednesday in Algeria.

“Everybody is supporting a cut,” OPEC President Chakib Khelil told reporters in Oran. [ID:nLF25582]]

He said Saudi Arabia, the world’s biggest exporter, has cut its supply by 8 percent and this had affected the market.

Since early September, OPEC has said it would reduce supply by a total of 2 million bpd, but prices continued to slide until a rally late last week, spurred partly by Saudi Arabia’s supply cut.

MARKET EXPECTS BIG CUT

Analysts say another 2 million bpd cut is needed from OPEC because demand will remain weak into 2009.

“We think should OPEC go for anything less than 2 million barrels a day, participants would be inclined to use this as a selling opportunity,” said Edward Meir of MF Global in a research note.

“The cartel is simply too far behind the curve to consider anything less than that,” he said.

“With global oil demand expected to continue falling through much of 2009, the pressure is on the cartel as well as non-OPEC producers such as Russia to remove excess production from the market,” said Jonathan Kornafel, Asia director of Hudson Capital Energy in a note.

OPEC’s Khelil said Russia, the world’s biggest exporter outside OPEC, had offered the group its “concrete support.”

There is already plenty of evidence that the world economic downturn has dampened demand for oil.

In China, the world’s second biggest energy consumer, implied oil demand shrank by about 3.5 percent in November from the year before, the first decline in nearly three years, Reuters calculations showed.

Khelil estimated there was an oversupply of 400 million barrels currently in the oil market.

He said he expected global oil demand to drop by 200,000 barrels per day in the first quarter of 2009 and by another 1.2 million bpd in the second quarter.

Jane Merriman
LONDON, Dec 15 (Reuters)

Oil rose above $45 on Thursday after the International Energy Agency predicted global growth in oil demand would resume in 2009 and Saudi oil minister said OPEC’s top exporter pumped less oil than expected last month.

World oil demand growth would return in 2009 after shrinking this year for the first time since 1983, the IEA, which advises 28 industrialized nations on energy policy, said in a monthly report. It also cut forecasts for supply outside OPEC next year.

“We knew the bad bits, demand down, but the supply downgrade was supportive,” said Rob Laughlin of MF Global.

U.S. crude was up $2.23 at $45.75 a barrel by 1152 GMT, after surging $1.45 to settle at $43.52 on Wednesday. Brent crude was up $2.55 at $44.95.

The IEA’s view that demand would grow in 2009 contrasts with that of the U.S. government’s Energy Information Administration, which forecast this week that world consumption would decline by 450,000 bpd next year.

The Paris-based IEA also lowered forecasts for supply from outside OPEC in 2009, leading to a 200,000 bpd increase in the amount it said OPEC needs to pump to balance the market.

SAUDI NUMBERS

Oil also rose as Saudi Oil Minister Ali al-Naimi said the world’s largest exporter pumped 8.49 million bpd of oil in November, less than estimated by analysts and in line with its OPEC target.

“We will give you the November number because that’s what everybody is looking for,” Naimi said during a visit to Poznan, Poland. “It’s 8,493,300 barrels per day.”

That would put the kingdom’s output in line with its implied OPEC target of 8.47 million bpd and is 560,000 bpd less than the IEA’s estimate of Saudi November production, published earlier on Thursday, of 9.05 million bpd.

Industry sources told Reuters on Wednesday they expected January shipments to be below Saudi’s existing OPEC target, implying it expects OPEC to agree a further supply cut when the producer group meets in Algeria on Dec. 17.

Russia, which will attend the Algeria meeting as an observer amid calls from some members for Moscow to join in output curbs, said on Wednesday it will present its own proposal at the talks.

Indicators on the health of the U.S. economy, such as weekly jobless claims due later in the day, could make grim reading for Wall Street and imply a further weakening in demand from the world’s top oil consumer.

Oil has fallen by more than $100 a barrel from a record high of $147.27 reached in the summer, pressured by weakening global demand.

Alex Lawler, Jennifer Tan

LONDON, Dec 11 (Reuters)

Oil fell below $43 on Tuesday after the U.S. government predicted world oil consumption would shrink this year and next, marking the longest demand contraction in three decades.

U.S. crude was down 84 cents at $42.87 a barrel at 1636 GMT, off a session low of $42.44.

London Brent crude fell $1.09 to $42.33.

The U.S. Energy Information Administration said in a report it expected global oil demand to fall by 50,000 barrels per day (bpd) in 2008 and 450,000 bpd in 2009.

This would mark the first time since the 1970s that world consumption would decline in two consecutive years.

“The EIA forecast is overly optimistic. I expect a significant contraction in demand, given the current state of the global economy,” said Tom Knight a trader at Truman Arnold.

The outlook for global oil consumption is very much on the minds of ministers from the Organization of the Petroleum Exporting Countries, which meets on Dec. 17 in Algeria.

OPEC is expected to reduce overall production by a minimum of one million barrels per day (bpd).

“Oil is on a count-down to OPEC now and everyone is expecting them to come up with something big — probably a cut of 1-1.5 million bpd,” said Rob Laughlin, senior oil analyst at brokers MF Global in London.

“If OPEC doesn’t make a big cut, this market is in trouble.”

Joe Brock
LONDON, Dec 9 (Reuters)

Oil leapt 6 percent on Monday to more than $43 a barrel, as a rebound in global equity markets and further evidence of supply cuts by top exporter Saudi Arabia helped the market break a six-session losing streak.

Prices dropped 25 percent last week, their biggest weekly fall in nearly 18 years, depressed by the world economic outlook.

U.S. crude for January delivery was up $2.56 to $43.37 a barrel by 1003 GMT. It fell more than 6 percent on Friday to close at $40.81, its lowest since December 2004.

London Brent crude rose $2.56 to $42.30 a barrel.

“Prices are higher on account of a short-covering bounce from extremely oversold conditions,” Edward Meir, of futures broker MF Global, said.

“OPEC’s meeting is nine days away, meaning that we could see some strengthening leading into the meeting,” he said.

Oil has fallen more than $100 a barrel from a record peak above $147 in July, as the credit crisis has started to hurt the wider economy and shrink demand for fuel.

Members of the Organization of the Petroleum Exporting Countries have called for more supply cuts when the producer group meets on Dec. 17 in Algeria.

SAUDI CUTS BACK

OPEC has already agreed to cut about 2 million barrels per day (bpd) of production. Top exporter Saudi Arabia has just provided further evidence of its intent to keep the taps tight.

The kingdom told at least two oil refiners in Asia on Monday it would deepen oil supply cuts to as much as 10 percent of normal contracted volumes in January versus a 5 percent cut in December supplies. It also reduced January supplies to some European refiners.

But OPEC may need to make an additional cut of as much as 2 million bpd to bolster prices in a market where demand is falling.

“The current downturn in prices has already priced in at least a 1.5 million bpd cut,” Tetsu Emori, a commodities fund manager at Japan’s Astmax Co. Ltd, said.

Monday’s rally spanned the commodities complex, with gold and copper rebounding strongly. European shares were firmer after strong gains in Asia.

Oil’s steep losses on Friday followed a U.S. employment report which showed the heaviest job losses in 34 years in the world’s top energy consumer.

But global markets have taken heart from efforts by Washington to finalize a rescue for the struggling U.S. auto industry.

Oil could also find support from predictions of a cold winter in the United States, with December set to be the coldest since 2000 on average.

Jane Merriman, Osamu Tsukimori, Jonathan Leff
LONDON, Dec 8 (Reuters)

Oil pared losses on Tuesday after an earlier fall to a new 3-1/2-year low below $48 a barrel, weighed down by heavy losses in global stock markets after confirmation that the United States was in recession.

But a rally in European shares and expectations of a bounce on Wall Street helped oil move up from its lows.

U.S. light crude for January delivery was up 3 cents at $49.25 a barrel by 1300 GMT. It earlier touched a new 3-1/2 year low of $47.36, its lowest since May 2005.

Prices had dropped nearly 10 percent on Monday.

London Brent crude was up 5 cents at $48.02 a barrel after touching a low of $46.02, its lowest since February 2005.

“Today’s equity market rebound is preventing oil from going lower,” said Olivier Jakob, of consultancy Petromatrix.

“The equity market has been a main input for oil,” he said. “Because the slowdown in oil demand is linked to the global economy – that’s why the correlation is very strong.”

Oil prices had tumbled on Monday after OPEC decided to wait until later this month to take more supply off the market to try to defend prices.

“OPEC was the key reason for the sell-off at first and then the poor performance on equity markets helped it follow through,” said Rob Laughlin, oil analyst at MF Global in London.

A key economic research body found on Monday that the United States economy had slipped into recession in December 2007.

The Organization of the Petroleum Exporting Countries is ready to cut production by a significant amount when it meets later this month in Algeria to try to shrink rapidly building stocks, OPEC’s secretary-general said on Monday.

Top exporter Saudi Arabia has highlighted $75 a barrel as a “fair price” for oil.

But OPEC’s existing cutbacks of about 2 million barrels per day have so far failed to bolster the price, which has dropped nearly $100 a barrel from a peak of more than $147 in July.

More bearish news could be in store on Wednesday, with U.S. crude oil inventories likely to have risen by 1.8 million barrels last week, a third consecutive weekly build, as imports continued to increase, a preliminary Reuters poll of analysts showed.

By Christopher Johnson
LONDON, Dec 2 (Reuters)

Oil fell more than $2 to below $53 a barrel on Monday after OPEC decided to wait until mid-December to make another cut in output to try to defend sagging prices.

U.S. light crude for January delivery was down $2.28 at $52.15 a barrel by 1200 GMT.

Oil had settled at $54.43 on Friday after a shortened post-Thanksgiving holiday session. On Nov. 21, it touched a three and half year low of $48.25.

London Brent crude was $2.05 lower at $51.44 a barrel.

“The markets are discounting OPEC’s decision to stand pat by selling off,” said Edward Meir, analyst at broker MF Global.

“When it comes to calibrating supply and demand to fit the new post-September economic realities, OPEC seems to be in a state of denial,” he said in a research note.

Oil is down by almost two-thirds from a peak of more than $147 a barrel in July. Prices fell almost 20 percent in November and 32 percent in October, their biggest monthly fall ever, despite OPEC’s around 2 million barrels per day cutbacks.

A global economic slowdown that has tipped a growing number of countries into recession has caused sharp falls in demand for oil.

But OPEC’s Gulf producers want to see strict compliance with the producer group’s existing output curbs of 2 million barrels per day (bpd) before agreeing to any more.

“FAIR PRICE”

“I was a little surprised they didn’t announce anything stronger,” said Simon Wardell, senior oil analyst at IHS Global Insight. “I think this (meeting) was to underline that everyone really needs to work together.”

The Organization of the Petroleum Exporting Countries (OPEC) meets next in Algeria on Dec. 17.

Saudi Arabia on Saturday pointed to $75 a barrel as a “fair price” for oil, the first time in years that the world’s biggest exporter has identified a target for crude prices.

Saudi Oil Minister Ali al-Naimi in Cairo cited this price as necessary to keep more expensive new projects at the margins of world supply on track.

“I believe $75 is the price for the marginal producer,” he told reporters in Cairo.

On Sunday he told the Saudi-owned al-Hayat newspaper the effect of OPEC’s existing cuts was still not clear.

In Cairo, OPEC ministers discussed how much more they needed to cut. Most, including Gulf producers led by Saudi Arabia, saw the need to trim another 1 to 1.5 million bpd.

OPEC Secretary General al-Badri told reporters in Tehran on Monday: “It will be a good amount, a good quantity,” without naming a specific figure.

Analysts said OPEC’s delay could prove costly.

“The longer OPEC waits to cut supplies, the higher stocks rise and the longer we think it’ll take for fundamentals to tighten once the tide does turn,” Jan Stuart, an economist with UBS in New York, said in a weekly U.S. oil data report.

By Jane Merriman
LONDON, Dec 1 (Reuters)

Zinc meandered around either side of 49 cents, ending up a half-cent, at $0.4893/lb. Aluminum was weak, dropping a penny and a half, to $0.8494/lb., while lead also plunged to its intraday low of $0.5724/lb., down nearly 3½ cents.

Copper tumbled to a three-year low as it led the sector downward amid—cue broken record—deepening gloom about the global economy.

The data are simply offering no relief. Among yesterday’s numbers, along with the October exports figure from China, the U.K. reported that home sales fell to the lowest level in at least three decades.

“Grim recessionary stats continue to roll in from all corners of the world,” wrote Edward Meir, of MF Global. “We do not expect to see any sustainable rallies resulting for a period of time.”

Putting a further damper on any hopes that China will show the way out of a worldwide recession, the vice president of the state-controlled China Nonferrous Metals Industry Association warns that China’s stimulus plan will only have a gradual effect on the country’s base metals industry.

Rising stockpiles are also playing in. Copper inventories monitored by the LME shot higher by 4,625 metric tons yesterday, to 265,475 tons. Stocks are up more than 27,000 tons already in November.

Adding to the carnage, the sharp drop in equities markets yesterday had a negative effect, as commodities tend to correlate with them.

Source: Base metals bomb -  China no longer seen as savior