Algeria's president Abdelaziz … Crude prices sank again Monday ahead
of an OPEC meeting where huge production cuts are expected, though
retail gasoline prices rose over the weekend for the first time in
nearly three months.
After hitting a low of $1.6559 gallon Friday, gas prices rose over the
weekend to break an 86-day streak begun in July after prices topped
$4.11 per gallon, according to the Oil Price Information Service.
With average wholesale costs rising 20 cents per gallon or more since
late November, "there's a sense that the Autumn low of $1.6559 gal may
indeed represent the 2008 low water mark for street prices," OPIS
analyst Tom Kloza said in a note.
Light, sweet crude for January on the New York Mercantile Exchange
peaked briefly above $50 a barrel early Monday, but then fell $1.77 to
settle at $44.51 with more dour economic news from both Asia and the
United States.
Investors were looking at more signals of deteriorating demand, rather
than at any OPEC action to cut supply, said Phil Flynn, an analyst at
Alaron Trading Corp. in Chicago.
"They really can't surprise the market," he said of OPEC. "When we
trade commodities, we have the tendency to buy the rumor and sell the
fact, and of course right now we've done a pretty good job in pricing
in the OPEC rumors."
On Monday, Toyota said it would indefinitely delay a new assembly
plant in Mississippi due to auto industry downturn.
Growth in China's factory output fell to its lowest level in nearly
seven years as trade plunged.
In London, January Brent crude fell $1.81 to settle at $44.60.
The Organization of Petroleum Exporting Countries, which accounts for
40 percent of global supply, has signaled it plans to announce a
substantial reduction of output quotas at its meeting Wednesday in
Algeria.
But in a hint of what could come out of the ministers' gathering, OPEC
President Chakib Khelil evoked OPEC's last Algeria meeting four years
ago, where "we reduced by 2 million barrels."
"It was a historic conference, and it enabled us to meet the challenge
of falling markets," he told reporters.
Kuwaiti oil minister Mohammed al-Eleim said Monday that OPEC was
"undoubtedly inclined" to cut production. But he added that any
decision would balance the need for a cut with its impact on the
ailing world economy and producer nations' need for revenue to fund
development projects.
Analysts have questioned whether OPEC members will follow through with
any announced cut.
"They're talking about a severe cut, but the question is their
discipline," said Christoffer Moltke-Leth, head of sales trading at
investment firm Saxo Capital Markets in Singapore. "Unless they really
surprise the market, this cut may not support the price much."
Flynn said oil has also been affected by falling equity markets.
"You can talk about OPEC cutting production, but if the economy goes
into the tank there's not going to be nobody left to buy their oil
anyway," he said.
Oil has jumped from a four-year low earlier this month of $40.50 a
barrel on expectations that an OPEC output reduction could be the
catalyst to stabilize the oil price, which has fallen 65 percent since
July.
Investors largely ignored two previous cuts this year that pulled a
total of about 2 million barrels of oil from the market each day,
focusing instead on a slowing global economy that's hurt crude demand.
More bad macro-economic and company news from the U.S. and Europe over
the coming weeks will likely push oil prices lower, Moltke-Leth said.
"I expect crude to continue its slide and I don't think OPEC is going
to prevent that," Moltke-Leth said. "Demand destruction in the major
economies will still very much be on the agenda. We could go as low as
$30 a barrel."
From Sunday to Monday, the national average for regular gas fell
three-tenths of a penny overnight to $1.66 a gallon, according to auto
club AAA, the OPIS and Wright Express.
In other Nymex trading, gasoline futures fell 4 cents to settle at
$1.0369. Heating oil fell 3.3 cents to settle at $1.4601 a gallon
while natural gas for January delivery rose 15.7 cents to settle at
$5.645 per 1,000 cubic feet.
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