Oil up 4% on forecast OPEC production cut

OIL PRICES: Forecast OPEC production cuts sees crude move higher. (Getty Images)

Oil prices rose nearly 4 percent on Tuesday on expectations OPEC will cut output again.

US crude settled at $41.65 a barrel, up $1.50 or 3.74 percent. London Brent crude rose $1.46 to $43.70 a barrel.

Slumping demand due to the global recession has sent crude prices off highs above $147 a barrel in July, prompting OPEC to agree to a series of deep production cuts.

Some OPEC members are calling for another reduction when the cartel meets this month.

"The crude oil market is being buffeted on the one hand by the global economic worries and what OPEC might do at its meeting on March 15," said Andy Lebow, a broker at MF Global in New York.

Crude prices dropped 10 percent on Monday as more grim economic news battered global equity markets. US stocks bounced up in the afternoon from 12-year lows, which had ignited a search for beaten-down shares.

"The market's consolidating after yesterday's sharp drop. (The) Stock market is doing same," said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc in New York.

Libya's top OPEC official, Shokri Ghanem, said markets were still oversupplied and the exporter group needed to reduce output, either through better compliance with existing supply curbs or a new cutback.

OPEC President Jose Botelho de Vasconcelos said the group has yet to decide whether to cut output further when it meets.

Price support also came after Royal Dutch Shell Plc shut a number of oil installations at its Nigerian venture following explosions on a pipeline. Production outages in the OPEC nation helped support prices during oil's record rally last year.

A Reuters poll of analysts ahead of weekly inventory data from the American Petroleum Institute and the government's Energy Information Administration forecast U.S. crude inventories rose by 1.2 million barrels last week, with fuel stocks seen falling. (Reuters)

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READERS' COMMENTS

More damage to the world's economy
Posted by Harmony, Dubai, UAE on Wednesday 4 March 2009 at 16:22 UAE time

Why is it in the current economic climate, that the Arab world is seeking to drive oil prices up again by cutting output. It seems that this part of the world is taking a very short-term, selfish approach - everywhere else is cutting interest rates in an effort to stabilise things and help the people (who are the backbone of every country), but what do we get here - the banks put up the interest rates. Now to try and drive profits back up to previously ludicrous inflated prices, Opec want to cut oil production.

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