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Oil slips below $47 as investors eye OPEC meeting

Oil prices slipped below $47 a barrel as investors jockeyed over whether OPEC will announce a production cut at its meeting on Sunday, and how big the cut might be.

business Updated: Mar 13, 2009 11:18 IST

Oil prices slipped below $47 a barrel as investors jockeyed over whether OPEC will announce a production cut at its meeting on Sunday, and how big the cut might be.

Benchmark crude for April delivery fell 29 cents to $46.74 a barrel by midday in Singapore on the New York Mercantile Exchange. Oil prices soared $4.70 on Thursday to settle at $47.03. Prices have lurched between $42 and $47 this week as leaders of the Organization of Petroleum Exporting Countries sent mixed signals about a possible output reduction.

Nigerian and Qatari officials have suggested they oppose another production cut on top of the 4.2 million barrels a day of reductions announced by OPEC since September, while Venezuela supports further cuts.

Russian news agencies said Thursday that Vice Premier Igor Sechin would attend the OPEC meeting and that his country supports the idea of trimming production.

"It seems to be hard for OPEC to reach consensus this time," said Christoffer Moltke-Leth, head of sales trading at Saxo Capital Markets in Singapore. "I expect a small cut, less than the market expects."

Most analysts are expecting a cut of between 500,000 and 1 million barrels a day.

Prices have rallied from below $35 a barrel last month, but haven't been able to breach $50 as the worst global recession in decades weighs on crude demand.

On Thursday, the US reported retail sales fell in February for the seventh time in the past eight months. And the Labor Department reported that first-time requests for unemployment insurance rose to 654,000 from the previous week's upwardly revised figure of 645,000, above analysts' expectations.

The number of people receiving benefits for more than a week also increased by 193,000 to 5.3 million, the most on records dating back to 1967.

The slumping US economy has hurt many developing countries which rely on demand from the West for their exports. Chinese oil imports have dropped 13 per cent in the first two months of the year while the country's exports plunged 25.7 per cent year-on-year in February.

"Unless there's a massive OPEC cut, it's well-capped at $50," Moltke-Leth said. "We've seen it in black and white with China's terrible export numbers. That's a lot of demand destruction." Traders were also waiting for Friday's reports on global demand expectations by OPEC and by the International Energy Agency in Paris.

In other Nymex trading, gasoline for April delivery fell 0.57 cents to $1.34 a gallon, while heating oil dropped 1.29 cent to $1.21 a gallon. Natural gas for April delivery was steady at $4.00 per 1,000 cubic feet.

Brent prices fell 28 cents to $44.81 on the ICE Futures exchange in London.

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