Crude Oil Prices Rebound on Speculation of Output Accord
NEW YORK — Crude oil prices rebounded Friday from a 21/2-year low on speculation that OPEC and other major producers will reach an accord on cutting output that would avert a price war.
An agreement would revive an oil market that fell 19% this week, its biggest decline in more than a decade, because of the dispute over cutbacks.
The conflict was sparked by the refusal Wednesday of the Organization of the Petroleum Exporting Countries to reduce output unless Russia, Norway, Mexico and other exporters join in. OPEC set a Jan. 1 deadline for its fellow producers to comply.
“The realization is sinking in that we overdid it the past few days,†said Phil Flynn, an oil trader at Alaron Trading Corp. in Chicago. The real threat of a price war won’t come “until Jan. 1, and in the meantime, OPEC and non-OPEC producers might work something out.â€
Crude oil futures on the New York Mercantile Exchange gained 58 cents Friday to close at $18.03 a barrel, which is $4.19, or 19%, lower than it was a week ago.
Nevertheless, the near-term outlook remained uncertain as Russia continued to resist pressure from OPEC to help boost prices that have fallen nearly 40% since mid-September, a result of slowing global demand for oil products that has been exacerbated by the terrorist attacks.
What is good for U.S. motorists--now paying an average of about $1.20 for a gallon of self-serve regular gasoline, the lowest prices in two years--looms as bad news for oil exporters.
On Friday, Mexico and OPEC member Venezuela said their oil ministers will go to Moscow to persuade Russia to trim production beyond a token 0.4% cut, about 30,000 barrels a day.
Mexico’s energy minister, Ernesto Martens, will meet with Russian officials Sunday in Moscow. Mexico is not an OPEC member but has agreed to cut production by 100,000 barrels a day, or 6%, beginning Jan. 1. Venezuela will send its minister, Alvaro Silva, to Moscow next month.
Norway’s oil minister, Einar Steensnaes, did not give specific figures Friday but said “Norway will, of course, take its part of the responsibility to stabilize oil prices†and work to prevent a price crash as occurred in 1998, when oil bottomed out at $10 a barrel.
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Bloomberg News and Reuters were used in compiling this report.
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