Oil slipped back towards $53 a barrel today, chipping away at a near 10 per cent rally after a rebound in equities and expectations of another OPEC cut helped the market to record its biggest two-day gain in two months.
Oil prices leapt by 9.1 per cent yesterday after Washington agreed to pump $20 billion into struggling Citigroup, the second-largest US bank, sending the US dollar to a two-week low against the euro and making oil more attractive.
US light crude for January delivery fell $1.06 cents to $53.44 a barrel by 7.20am, having rebounded from the 3-½ year low of $48.25 it hit on Friday.
Prices have tumbled by nearly $100 from their record high in July as the global economic crisis eats into demand in consumer nations. London Brent crude edged down $1.13 to $52.80 a barrel.
Oil traders are now looking ahead to Saturday's informal OPEC meeting in Cairo for further action from the cartel, which agreed a 1.5 million barrels per day cut in oil production from November 1st, supply curbs that may not be fully felt until December or even January when oil reaches refineries worldwide.
Analysts were divided over whether further action was imminent, with 8 of 15 oil analysts polled by Reuters saying OPEC would likely wait until its policy-setting meeting in Oran on December 17th to tighten supplies further.
"The only support is coming from OPEC. And the market might have to wait for the second cut," said French bank Societe Generale in a research report.
The weakness of the oil market calls for another OPEC cut of more than 1 million barrels per day (bpd), the group's president, Chakib Khelil, said yesterday, but added the precise amount would only become clear in December.
Oil prices have not risen for more than two days in a row since mid-September, with fleeting rallies quickly sold as investors flee riskier markets or sell commodities to cover falling equity positions.
Bringing some seasonal support to the market, cold weather in the United States is expected to send demand for heating oil, concentrated in the Northeast, 10 per cent above normal this week, according to the National Weather Service.
Reuters