Crude Oil Falls After OPEC Delays Decision to Reduce Production

Dec. 1 (Bloomberg) -- Crude oil fell in New York after the Organization of Petroleum Exporting Countries deferred for another two weeks a decision to reduce output.

Slowing global growth means demand will be “much lower” than expected a month ago, OPEC said in a statement after the group’s Nov. 29 meeting in Cairo. Another reduction on Dec. 17 may not be needed if member states enacted 80 percent of the 1.5 million barrel-a-day reduction agreed in October, Al Hayat reported, citing Saudi Arabia’s Oil Minister Ali al-Naimi.

“We’ve got a market that’s focused a little bit too much on the demand-side factors and perhaps less on supply,” Gerard Burg, energy and minerals economist at National Australia Bank Ltd. in Melbourne, said in a Bloomberg television interview. The impact of future cuts “will be muted by the fact that spare capacity has been on the increase,” he said.

Crude oil for January delivery fell as much as $1.33, or 2.4 percent, to $53.10 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $53.19 at 8:30 a.m. in Singapore.

The contract fell 1 cent on Nov. 28, when trading was shortened because of the Thanksgiving holiday the day before. Prices leapt 7.2 percent on Nov. 26 after China, the world’s fourth-largest economy, slashed interest rates to sustain growth and the European Union proposed $259 billion of measures to limit the impact of the global financial crisis.

OPEC Output

OPEC pumps about 40 percent of the world’s oil. Slowing demand means the global market is over-supplied by more than 2 million barrels a day, Iranian Oil Minister Gholamhossein Nozari said yesterday.

Prices around $75 a barrel would be “fair” and would support investment in new fields, al-Naimi said at the weekend.

Brent crude oil for January settlement fell 49 cents, or 0.9 percent, to $53 a barrel on London’s ICE Futures Europe exchange today. It rose 0.7 percent to $53.49 on Nov. 28.

New York oil futures have tumbled 64 percent from their July 11 record of $147.27 a barrel as the U.S., Europe and Japan headed for their first simultaneous recession since World War II.

Prices gained 9 percent last week, having reached $48.25 on Nov. 21, the lowest since May, 2005, as U.S. equity prices plunged and U.S. oil stockpiles rose for an eighth week.

“The oil market is really struggling for direction,” National Australia’s Burg said. “The prospect of cuts in future might tend to stabilize the crude market for the short-term” and prices have established “something of a floor” at $50, he said.

U.S. Economy

A report today in the U.S., the world’s largest oil consumer, will probably show manufacturing contracted for a fourth straight month in November, according to a survey of economists. The forecast decline will take the Institute for Supply Management’s factory index to the lowest in 28 years.

U.S. crude oil inventories jumped 2.3 percent to 320.8 million barrels in the week ended Nov. 21, the most in six months, according to Energy Department data. Global stockpiles are equivalent to about 56 days of demand, when 52 days would be usual this time of year, OPEC Secretary General Abdalla el-Badri said Nov. 27.

Weak near-term oil prices have made it viable for companies to hire supertankers to store the commodity for later use, Frontline Ltd. Chief Executive Officer Jens Martin Jensen said Nov. 28. The company has leased two tankers for storage and is in talks for a third, he said.