OIL PRICES struggled to rally yesterday ahead of this week's crucial Opec meeting. Sentiment in commodity markets remained fragile amid ongoing fears that the crisis in financial markets will drag the global economy into recession.
Nymex November West Texas Intermediate rose 35 cents to $72.20 a barrel after touching a high of $74.50 earlier in the session. The November contract expires at the close of trading today and the December contract, which will become the new benchmark, traded 18 cents higher at $72.31 a barrel. ICE December Brent gained 30 cents at $69.90 a barrel after reaching a session high of $72.
Following the sharp fall in oil prices since July, Opec has brought forward to October 24th an emergency meeting to discuss a cut in production.
Analysts at the Centre for Global Energy Studies said Opec would have to decide how far it could ignore the global economic crisis and pressure from consuming countries not to try to reverse recent price falls.
"The real danger is that a big [production] cut will send prices soaring again, putting the global economy at even greater risk," said the centre.
Traders think the oil cartel might cut output by about one million barrels a day.
"We expect Opec to announce production cuts at this week's meeting," said Michael Lewis, commodity strategist at Deutsche Bank. "However, while this may arrest the decline in the oil price in the short-term, we believe the cartel will struggle to cut production as fast as world growth is slowing next year. Consequently we expect oil prices to fall to $50 a barrel in 2009." - ( Financial Times service)
