Oil Pares Losses

Crude oil pared losses after the Bush administration said it may tap the $700 billion bank-rescue fund to prevent an auto-industry collapse, easing concern about a prolonged recession that will cut fuel demand.

Oil climbed more than $3 from the day’s lows as the administration’s willingness to give short-term help to General Motors Corp. and Chrysler LLC eased speculation that the companies will collapse. Goldman Sachs Group Inc. lowered its average oil price forecast for next year and said crude may drop to $30 a barrel in the first quarter.

Crude oil for January delivery fell $1.58, or 3.3 percent, to $46.40 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Prices declined as much as $4.66, or 9.7 percent, before the administration dropped opposition to using the money to finance U.S. automakers.

Oil rose yesterday after the Saudi Arabian oil minister said he had delivered cuts already promised to OPEC, a sign that world supplies are smaller than traders had estimated. Prices are up 9.6 percent this week.

Saudi Arabia’s oil production was absolutely” in line with its Organization of Petroleum Exporting Countries’ quota, Minister Ali al-Naimi said in an interview yesterday. The desert kingdom is the world’s biggest oil producer and OPEC’s most influential member.

OPEC plans to meet on Dec. 17 in Algeria to discuss further cuts in production. The group agreed to slash output by 1.5 million barrels a day on Oct. 24.

World oil output must correspond” to falling demand, Russian Trade and Industry Minister Viktor Khristenko said today, as the country considers cutting production alongside OPEC. President Dmitry Medvedev said yesterday that Russia, the world’s second-biggest producer, may join OPEC and reduce output to support prices.

The Paris-based International Energy Agency, an adviser to 28 nations, said global oil demand will contract this year for the first time since 1983, and reduced its outlook for 2009.

Consumption worldwide will shrink 200,000 barrels a day, or 0.2 percent, in 2008, the IEA said in a report yesterday. Next year’s growth may be wiped out if the economic slump deepens, the agency said.

Brent crude oil for January settlement declined $1.03, or 2.2 percent, to $46.36 a barrel on London’s ICE Futures Europe exchange.

TradingEconomics.com, Bloomberg
12/12/2008 12:15:09 PM