Oil Rises on Potential OPEC Cut

SPECULATION is once more on the move, even now as most developed nations are in recession OPEC will once more try to propel crude prices to higher levels...If prices go higher this will no doubt affect crude producers as demand will fall further... Crude oil rose as traders bought contracts to close out bets that prices will fall and on signs that OPEC will cut production twice in as many months.
OPEC, which pumps 40 percent of the world’s oil, may reduce its output limit by as much as 2.5 million barrels a day to reverse recent declines. Traders who held short positions, or bets prices would fall, are purchasing futures after oil dropped more than 20 percent in the past two weeks.
OPEC should make a “substantial” output cut when it meets on Dec. 17 in Algeria, top oil official, said on Dec. 8. OPEC agreed on Oct. 24 to cut daily output by 1.5 million barrels. OPEC will work it back up to $100, It will all be determined by the global economy. If you get a recovery in the global economy, you will get it back up.U.S.
President-elect Barack Obama proposed on Dec. 7 an economic stimulus plan based on infrastructure development to help lift the country out of its worst recession since World War II. Australia will start making one-time payments to families and pensioners under a A$10.4 billion grant program and China may cut personal income tax.

Global demand fell every year from 1980 to 1983, according to the department, the last time there was a yearly consumption drop. Oil usage will decline an additional 450,000 barrels a day next year to 85.3 million barrels a day, the department said.

2009 Forecasts

The International Energy Agency and OPEC have lowered demand forecasts in the past month because of the economic contraction.

The IEA reduced its 2009 estimate by 670,000 barrels a day, or 0.8 percent, to 86.5 million barrels a day in a Nov. 13 report. The Organization of Petroleum Exporting Countries cut its forecast for next year by 530,000 barrels a day, or 0.6 percent, to 86.68 million barrels a day, in its monthly oil market report on Nov. 17.

Traders are betting that oil for January delivery may fall below $42 a barrel, according to data on put options contract volume from the New York Mercantile Exchange. Crude may decline to $25 a barrel next year as demand drops on the economic contraction, and speculation by OPEC members…