Oil rose on Thursday on expectations Opec will agree to cut output at an emergency meeting after slowing demand and the growing financial crisis sent prices crashing from record highs set this summer. Opec members gathering in Vienna ahead of the Friday meeting have pointed toward a supply cut, with Iran suggesting a 2-million-barrel-per-day cut and Qatar at least a 1-million-bpd reduction.
Analysts polled by Reuters anticipate the cartel will reduce output by 1 million to 1.5 million bpd. Top exporter Saudi Arabia has said only that the oil price would be determined by the market. US crude settled at $67.84 per barrel, gaining $1.09. London Brent crude ended up $1.40 at $65.92.
"Crude prices have rebounded and that could be short-covering before Opec's meeting tomorrow," said Mark Waggoner, president of Excel Futures in Huntington Beach, California. The slumping global economy has damped oil demand in large consumer nations such as the United States, helping push prices down from the record $147.27 a barrel struck in July.
US crude fell on Wednesday to its lowest level in 16 months and settled 7 percent lower after US data showed crude and product inventories swelling due to weaker demand. The sharp drop came amid a broader sell-off on global markets rattled by fear that economies were heading into recession.
On Wall Street on Thursday, US equities gave back earlier gains as investors remained worried about a faltering economy and gloomy outlook for corporate profits. Earlier, US stocks had clawed back from five-year lows in choppy action on bargain-hunting after the latest plunge.
Bleak outlooks from world carmakers and a barrage of job cuts by major US companies, including Chrysler and Xerox, deepened fears of an extended global recession and kept market nerves on edge on Thursday. Opec President Chakib Khelil of Algeria said Opec could consider cutting back its oil output in several steps. "I think that is a solution not to be excluded," Khelil told reporters.
He said he also did not rule out the possibility the group could also cut back production with immediate effect. "I think we will have both solutions," Khelil said. Khelil said he favours Opec's reference crude oil basket price at $90 to ensure energy projects go ahead. The basket price stood at $60.82 on Wednesday. Some analysts, however, pointed out that the slowing global economy could limit the impact from any oil supply cuts Opec might agree on to prop up prices.
Total oil product demand in the United States, the world's top oil consumer, fell 8.5 percent in the past four weeks from a year earlier, according to data released on Wednesday. "It illustrates the immense size of the demand hole Opec has to dig itself out of if it is to successfully recalibrate supply with the new demand parameters," MF Global said.