Oil steady near $51 after falling overnight

Business Materials 26 November 2008 09:54 (UTC +04:00)

Oil prices were steady near $51 a barrel Wednesday in Asia as investors weighed more bad economic news from the U.S. that sparked a sell-off of crude overnight, AP reported.

Light, sweet crude for January delivery was up 34 cents to $51.12 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore.

The contract overnight fell $3.73 to settle at $50.77 after the U.S. said its gross domestic product shrank 0.5 percent in the third quarter, which was worse than previously estimated.

Slowing global economic activity has spurred corporate losses and job cuts, undermining demand for fuels to power industry and cars. Meanwhile, plunging U.S. home and stock prices have gutted personal wealth and hurt consumer demand.

The Standard & Poor's/Case-Shiller U.S. National Home Price Index tumbled a record 16.6 percent during the quarter from the same period a year ago, the lowest level since the first quarter of 2004.

The Paris-based Organization for Economic Cooperation and Development said Tuesday that economic output next year would likely shrink by 0.4 percent for the 30 market democracies that make up its membership, against the 1.4 percent growth prediction for 2008. That would be the worst global recession since the early 1980s.

"Commodity prices are really captive to the broader economic and financial issues," said Gerard Burg, minerals and energy economist with National Australia Bank in Melbourne. "It's possible we've seen a bottom, but anything over $60 is probably too high over the next few weeks."

Last week, prices fell as low as $48.25 a barrel in intraday trading.

Prices may get a boost from a production cut by the Organization of Petroleum Exporting Countries, which accounts for 40 percent of global supply. The group will hold and informal meeting Saturday in Cairo and an official meeting Dec. 17 in Algeria.

Venezuelan Oil Minister Rafael Ramirez said Sunday that OPEC should cut oil production by 1 million barrels per day at the Cairo meeting. OPEC President Chakib Khelil said Monday that if the organization met today, a cut of 1 million barrels would not be enough to support oil prices. But Khelil has said in the past that OPEC needs more time to evaluate the effect of previous production cuts.

The group cut output by 1.5 million barrels a day last month.

"Very few members of OPEC are content with prices this low and they really want to firm up the market," Burg said. "We haven't heard OPEC say they're happy with prices at $50. Russia could move in line with OPEC."

Investors will also be watching for signs of slowing U.S. demand in the weekly oil inventories report to be released Wednesday by the U.S. Energy Department's Energy Information Administration.

The report is expected to show that oil stocks rose 400,0000 barrels last week, according to the average of estimates in a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

The Platts survey also projects that gasoline inventories rose 300,000 million barrels and distillates fell 900,000 barrels last week.

In other Nymex trading, gasoline futures rose 1.01 cents to $1.11 a gallon. Heating oil gained 0.94 cent to $1.71 a gallon while natural gas for January delivery increased 5.4 cents to $6.44 per 1,000 cubic feet.

In London, December Brent crude rose 45 cents to $50.80 on the ICE Futures exchange.