Oil up more than $1 before expected OPEC supply cut

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(Agencies)
Updated: 2008-12-17 19:36

In its monthly oil market report, OPEC said on Tuesday the first drop in world oil demand in 25 years would sharply lower the need for OPEC crude in 2009, opening the door for a substantial production cut at its meeting.

A view of Krechba gas treatment plant, about 1200 km (746 miles) south Algiers December 14, 2008. Oil rose by more than a dollar to nearly $45 on Wednesday ahead of an OPEC meeting in Algeria widely expected to announce a big cut in production. [Agencies]

For a breakdown on how the expected cut may look, click on Russia, the world's largest non-OPEC producer, has sent a high-level delegation to observe the meeting. Its deputy Prime Minister Igor Sechin, said Russia could cut oil exports by as much as 320,000 bpd but told Reuters that cooperation with OPEC would progress only 'step by step.'

Azerbaijan said it could also support any OPEC decision.

But Mexico, which contributed to OPEC cuts in 1999 and 2001, said it would not weigh in this time as its oil output was already declining.

OPEC has already agreed to cut output by 2 million bpd at two previous meetings, but demand has fallen faster and stocks of oil are building up. OPEC said 45 million barrels of crude oil are currently being stored at sea on oil tankers.

Crude oil stocks in top energy consumer the United States are running near the top of their five-year range and forecasters expect data to show they rose by another 300,000 barrels last week, according to a Reuters poll ahead of the US fuel inventory report due later in the session.

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