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Oil steady amid OPEC talks of more output cuts

(Agencies)
Updated: 2009-02-16 14:33

SINGAPORE – Oil prices stayed above $37 a barrel Monday in Asia as OPEC members talked up more production cuts over the weekend amid weakening global demand for crude.

Venezuelan President Hugo Chavez greets supporters after casting during a referendum in Caracas February 15, 2009. Venezuelans voted on Sunday on a proposal that would allow socialist Chavez to stay in power for as long as he keeps winning elections after a turbulent decade ruling the OPEC nation. [Agencies]

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Light, sweet crude for March delivery fell 6 cents to $37.45 a barrel by midday in Singapore on the New York Mercantile Exchange. The contract rose $3.53 on Friday to settle at $37.51.

The Organization of Petroleum Exporting Countries has implemented most of the 4.2 million barrels a day of output reductions announced since September, but the cuts have been overwhelmed by a collapse in crude demand amid the global slowdown.

On Sunday, Mohammed Saleh al-Sada, Qatar's minister of state for energy and industry affairs, said OPEC is ready to cut output further when it meets next month. Al-Sada said a reasonable price for oil would be $70 a barrel.

Venezuelan Oil Minister Rafael Ramirez said Saturday his country would support new production cuts in the face of rising crude inventories.

"It's probably 50-50 that they'll cut again in March," said Clarence Chu, a trader at market maker Hudson Capital Energy in Singapore. "The budgets of a lot of those countries run on oil so they need the price higher."

Even within OPEC, however, there is skepticism over whether reducing supply will spur higher prices.

Moussa Marafi, a high-ranking Kuwaiti oil official, told Annahar newspaper in comments published Sunday that crude prices are unlikely to rise above $40 per barrel, even if OPEC decides to cut as much as 2 million barrels per day next month.

Oil prices are being pressured by surging US crude inventories and a lack of compliance to quotas by some OPEC members, he said.

"Until demand picks up, oil won't have a significant rally," Chu said. "Another big OPEC cut could add $5 to the price, but it's not going to send it to $70."

US markets are closed Monday for Presidents Day.

Investors have already priced in the passage of a $787 billion stimulus package that President Barack Obama plans to sign on Tuesday and will be looking for its impact on consumer and industrial demand in the coming months.

Obama is scheduled to outline his mortgage-rescue proposal on Wednesday.

In other Nymex trading, gasoline futures were steady at $1.21 a gallon. Heating oil gained 0.25 cent to $1.30 a gallon, while natural gas for March delivery droppped 17.2 cents to $4.28 per 1,000 cubic feet.

In London, the March Brent contract fell 11 cents to $44.70 on the ICE Futures exchange.