OIL prices rose to above US$46 a barrel yesterday in Asia as investors anticipated that another Organization of Petroleum Exporting Countries production cut will shrink global supplies.
Benchmark crude for April delivery rose 68 cents to US$46.19 a barrel in Asia. Oil prices rose US$1.91 on Friday to settle at US$45.52.
OPEC plans to meet in Vienna next month and some of the group's leaders have said a production cut is likely.
Iranian Oil Minister Gholam Hossein Nozari was quoted by the official IRNA news agency on Sunday saying that OPEC members have "almost" completely complied with the 4.2 million barrels a day of output quota reductions announced since September. He said that OPEC should coordinate supply policy with non-OPEC producers.
"Oil is rallying primary due to the speculation that OPEC will cut production," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. "The market in the last week or two has paid more attention to supply because the OPEC cuts have shown up in the data."
Most analysts expect OPEC to announce a cut of at least 500,000 barrels a day although the cartel's biggest producer, Saudi Arabia, hasn't yet commented on the possibility of further output reductions. "The Saudis are the most important voice," Shum said. "They typically don't say anything until the day before a meeting."
Oil has traded at near US$40 a barrel since December after plummeting from US$147 in July as crude demand fell amid the global recession.
Oil investors often look to stock markets as a measure of sentiment on the overall economy, but crude has risen from below US$35 a barrel last month despite the major United States equity indexes plunging to 12-year lows.
"Even though we have rather grim economic news, the oil market has broken away from the equities markets," Shum said. "I think oil may be a little overdone given that there's no good news on the economic front."
(Shanghai Daily March 10, 2009)