Commodity Daily News

Oil Prices Eye $50 a Barrel

Crude Oil prices jumped more than 3% to $47 a barrel yesterday on the news of Chinese vessels harassing a U.S. Navy ship in the South China Sea. The naval incident on Sunday, between the United States and China, the world's top Oil consumers, has boosted geopolitical tensions, adding to the pressure of a possible deeper production cuts by the Organization of Petroleum Exporting Countries (OPEC). The OPEC cartel agreed on a series of deep output cuts last year in an effort to stem the fall in prices, and next meets on February 15 to set output policy again. The Organization has implemented a reduction in output of 4.2 million barrels a day since September, equivalent to about 5% of global Oil demand.

OPEC Secretary General Abdalla el-Badri said on Monday that Oil prices at about $40 a barrel are not suitable, because this price level would not guarantee investment in future capacity beyond 2013. He also stated that the producers' group would study all options when ministers meet Sunday, though he declined to say whether a further production cut was being considered. Analysts forecast that in case OPEC decides to cut its production by 1 million barrels a day at its meeting, Crude Oil is likely to rise above $50 a barrel in the 2nd quarter of 2009.