Oil falls over $1 after OPEC defers cut

Business Materials 1 December 2008 12:58 (UTC +04:00)

Oil fell more than a dollar on Monday, toward $53 a barrel, after producer cartel OPEC decided to delay a decision on a third supply cut to its next meeting later in December as economic woes squeeze oil demand, reported Reuters.

Gulf producers want to see strict compliance with recent output curbs of 2 million barrels per day (bpd) before considering further cuts when the Organization of the Petroleum Exporting Countries (OPEC) meets in Algeria on December 17.

U.S. light crude for January delivery fell $1.01 to $53.42 a barrel by 0655 GMT, after having dipped below $53 earlier.

Oil settled down 1 cent at $54.43, against its Wednesday settlement in thin trading in a shortened, post-Thanksgiving holiday session on Friday.

London Brent crude slid $1.14 to $52.35.

"We certainly weren't surprised with OPEC's decision not to cut at the Cairo meeting. However, there will most likely be repercussions and we fully expect the market to test the $50 level again," said Jonathan Kornafel, Asia director of Hudson Capital Energy.

Delegates said ministers discussed how much more they needed to cut in December. Most, including Gulf producers led by Saudi Arabia, saw a requirement to trim another 1 to 1.5 million bpd.

Asked whether there would be a cut decision in Algeria, OPEC Secretary General al-Badri told reporters in Tehran: "There will be action there ... It will be a good amount, a good quantity," without naming a specific figure.

Prices lost almost 20 percent in November, after a drop of 32 percent in October, the biggest monthly fall ever, despite OPEC's two supply cuts since September aimed at taking around 2 million bpd out of the market.

"Evidently there is too much oil around. U.S. imports surged 10 percent for the week. The longer OPEC waits to cut supplies, the higher stocks rise and the longer we think it'll take for fundamentals to tighten once the tide does turn," Jan Stuart, an economist with UBS in New York, said in a weekly U.S. oil data report.

Oil has tumbled from record highs over $147 a barrel struck in July as demand in the United States and other large consumer nations has slumped amid an economic crisis.

In a rare move, Saudi Arabia on Saturday cited $75 a barrel as a "fair price" for oil in order to keep the more expensive new projects at the margins of world supply on track, the first time in years that the world's biggest exporter has identified a target for crude prices.