Oil prices fell below US$45 a barrel in Asia yesterday after OPEC decided not to cut production levels at its meeting over the weekend in Vienna.
Benchmark crude for delivery next month fell US$1.88 to US$44.37 a barrel by midmorning in Singapore on the New York Mercantile Exchange. Oil prices dropped US$0.78 on Friday to settle at US$46.25 a barrel.
OPEC members said on Sunday they would strive to adhere more closely to the group’s current output quotas. OPEC is overshooting its daily target level of just under 25 million barrels a day by about 800,000 barrels.
PHOTO: BLOOMBERG
Prices had risen from under US$35 a barrel last month as investors anticipated OPEC would cut production by up to 1 million barrels a day on top of 4.2 million barrels of reductions announced since September.
“The gains we’ve seen in oil over the last two or three weeks were from pricing in a further cutback, which didn’t come through,” said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne. “So now we’re seeing some profit-taking.”
Russian Deputy Prime Minister Igor Sechin said his country, the world’s second-largest producer, would reduce crude sales. Analysts were skeptical Russia would follow through with production cuts given the country’s reliance on oil income.
“Russia tends to be more talk than action than OPEC,” Pervan said. “I think they’d be pretty hesitant to bring volumes down, but it’s worth watching.”
Oil traders will likely turn their attention to global crude demand and the possibility of a second-half economic recovery.
US Federal Reserve Chairman Ben Bernanke said on Sunday on CBS’ 60 Minutes that the US recession “probably” will end this year if the government succeeds in bolstering the banking system.
However, Bernanke said that even if the recession, which began in December 2007, ends this year, the unemployment rate will keep climbing past the current quarter-century high of 8.1 percent.
“The market now doesn’t have that supply-side issue to support it,” Pervan said. “There’s more downside risk now that the focus is shifting from supply to demand issues.”
“All we need to see is one or two weak numbers out of the US, and we’re right back into the low US$40s and high US$30s,” he said.
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