Oil Rises as OPEC Says May Cut Supply
NEW YORK Oil prices rose Monday as the OPEC cartel said it might cut supply as the Northern Hemisphere winter draws to a close.
U.S. crude oil settled 28 cents higher at $47.44 a barrel, within a $45-$50 range held over the past five weeks. London Brent crude settled 25 cents higher at $45.53 a barrel.
Prices have bounced from a one-month low last week after the International Energy Agency (IEA) adjusted its forecasts for this year, raising its expectation for demand growth and lowering its forecasts for new supply.
The IEA showed heightened need for oil from the Organization of the Petroleum Exporting Countries, but the cartel remains more focused on a feared slowdown in second-quarter demand.
Last Friday, OPEC's acting Secretary-General Adnan Shihab-Eldin told Reuters the group might need to cut supply for the second quarter even if consumption stayed robust, and would need a faster, bigger cut if demand were to fall sharply.
The chances of OPEC trimming production before the cartel's March 16 meeting in Iran have been diminished, but not eliminated, by stronger-than-expected demand, he said.
Oil traded lower in the morning but rose through the day as independent traders took long positions.
"It couldn't get any traction at the lower levels, so it's getting support from the possibility that OPEC might cut in the second quarter," said Marshall Steeves, analyst at Refco in New York.
OPEC agreed in January to keep output steady for the time being, but warned that it could agree snap cuts by telephone if prices fell sharply or stockpiles rose, serving notice to traders not to count on a sustained price fall.
Some cartel members have staked out $40 a barrel for U.S. crude as a level they are prepared to defend.
Oil speculators, the most liquid segment of the market, have taken note of OPEC's warning and have stayed long, trimming their positions by just over 3,000 lots to hold 27,557 lots of net length in crude futures by Feb. 8, data showed on Friday.
On the supply side, Iraq has resumed its northern oil exports after supplies were halted by attacks since mid-December, industry sources said.
The U.S. Energy Information Administration will release weekly petroleum supply data Wednesday. A Reuters forecast showed crude oil stocks likely rose for the first time in three weeks last week by a mild 1.1 million barrels.