Oil prices edge up in Asia ahead of OPEC meeting

[December 11, 2008]  KUALA LUMPUR, Malaysia (AP) -- Oil prices edged higher Thursday in Asia with investors hoping for a significant OPEC production cut next week to boost the market.

Light, sweet crude for January delivery was up 59 cents to $44.11 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract rose 3.4 percent, or $1.45, overnight to settle at $43.52.

"The market is trading sideways right now. It's the year-end and many traders don't want to take risks. Sentiment is still bearish. A lot will depend on the OPEC meeting next week," said Clarence Chu, trader at Hudson Capital Energy in Singapore.

The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global crude supply, has signaled it plans to reduce output quotas at a meeting Dec. 17 in Algeria.

Many analysts expect production cuts of as much as 2 million barrels a day, which would match the combined reductions of two previous output cuts earlier this year.

Victor Shum, energy analyst at consultancy Purvin & Gertz in Singapore, said indications from Saudi Arabia -- the biggest oil producer in OPEC -- that it would cut production going into January boosted hopes of a significant output reduction by OPEC of more than 2 million barrels a day.

Russia's plan to coordinate production levels with other non-OPEC producers also supported prices, he said. Energy Minister Sergey Shmatko said Russia would soon make an announcement of its intentions with OPEC.

Shum said OPEC production cuts, which had failed in the past to curb plummeting oil prices, would not result in a rally but would stabilize the market and prevent any further downward spiral.

"There is a lot of bad economic news and if there is no meaningful cut by OPEC, oil pricing will come under a lot of downward pressure," he said.

The success of any output cut in stabilizing the oil price will depend on how closely OPEC members comply with it, he said.

OPEC's November production was well above quotas agreed to by members earlier this year that were intended to take 2 million barrels of oil off the market each day, according to Platts, the energy information arm of McGraw-Hill Cos.

OPEC's 13 members pumped an average of 31.38 million barrels a day last month, a decline of only 880,000 barrels from the October level.

Oil prices have fallen 70 percent since peaking at $147.27 in July. After hitting $40.50 a barrel last week, some oil traders believe that if the market has not bottomed out, it is close to doing so.

In other Nymex trading, gasoline futures rose 1.63 cents to settle at 98.5 cents a gallon. Heating oil gained 1.5 cents to $1.42 a gallon and natural gas for January delivery rose 1.2 cents to $5.698 per 1,000 cubic feet.

In London, January Brent crude rose 30 cents to $42.70 on the ICE Futures exchange.

[Associated Press; By EILEEN NG]

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