Oil pared losses after closing at the lowest price since July 2009

Oil pared losses after closing at the lowest price since July 2009 as Saudi Arabia questioned the need to cut output, bolstering speculation that OPEC’s biggest producer will defend market share.

Brent futures rose as much as 1.1 per cent in London while West Texas Intermediate advanced 1.2 per cent in New York.

The market will correct itself, according to Saudi Arabian oil minister Ali Al-Naimi.

Global demand for crude from the Organisation of Petroleum Exporting Countries will fall next year by about 300,000 barrels a day to 28.9 million, the least since 2003, the group predicted yesterday.

Oil’s collapse into a bear market has been exacerbated as OPEC’s three largest members offered discounts on exports to Asia.

The cartel, which supplies about 40 per cent of the world’s crude, decided against reducing its output quota at a meeting last month even as the US pumps at the fastest pace in more than three decades.

“Crude prices will continue to trade at lows,” Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney, said by phone today. “There are issues with supply and OPEC are not going to cut while the US just keeps on producing.”

Brent for January settlement gained as much as 71 cents to $64.95 a barrel on the London-based ICE Futures Europe exchange and was at $64.67 at 2:48 p.m. Singapore time. It dropped $2.60 to $64.24 yesterday.

Saudi Arabia led OPEC’s decision on November 27 to maintain its collective quota at 30 million barrels a day, resisting calls from members including Venezuela to reduce output.

Bloomberg