Oil above $108 on Opec cut

Wed, Dec 12, 2012, 00:00

Brent crude held above $108 a barrel today as Opec pumped less oil last month, although rising output from the United States and uncertainty about its budget for next year limited price gains.

Opec's production declined in November closer to its oil output target of 30 million barrels per day (bpd), led by a cut in Saudi Arabian output.

January Brent crude rose 24 cents to $108.25 a barrel by 0605 GMT, up for a third day. US crude for January edged up 2 cents to $85.81 after rising for the first time in six trading sessions yesterday.

"The outlook for energy demand will not be as powerful. They (Opec) might start talking about quotas and that could support prices," said Jonathan Barratt, chief executive officer at Barratt's Bulletin, a Sydney-based research firm.

The group has been widely expected to retain its output target when it meets today and argue instead about who should be the group's next secretary-general.

Saudi Arabia increased supply earlier in the year to replace the 1 million-bpd drop caused by Western sanctions against Iran over its disputed nuclear programme.

But Opec may soon have to review its production target on a weak demand growth outlook next year, analysts say.

Opec warned yesterday that world oil demand growth could underperform in the first half of 2013 due to economic weakness.

Despite Opec's supply cut, crude production in the United States is rising at the fastest rate in history toward a 20-year high next year due to a shale oil revolution, the US Energy Information Administration said.

The world's largest oil consumer is expected to produce 7.1 million bpd in 2013, up 11 per cent from this year, further reducing its need for imports.

US crude oil stockpiles are expected to have fallen last week, while distillate and gasoline stockpiles increased, a Reuters survey of analysts showed ahead of EIA's data to be released later today.

Data from the American Petroleum Institute yesterday showed a sharp rise in crude and refined product stocks last week.

The market is now waiting for the outcome of a US Federal Reserve policy meeting later in the day that investors hope will unveil more bond buying measures, supporting the appetite for riskier assets.

A softer dollar, down about 0.4 per cent so far this week, amid hopes of more Fed stimulus also kept a floor under commodities priced in the greenback by making them more affordable for holders of other currencies.

But continued wrangling over the US "fiscal cliff" kept investors on the edge.

Markets have generally priced in a fix to negotiations to avert the "fiscal cliff" of $600 billion worth of tax cuts and spending increases that expire early next year and threaten to tip the world's second biggest economy into recession.

But until a deal is reached, traders expect a ceiling to remain over prices.


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