Oil rose over $1 per barrel on Monday as Wall Street and global stock market rallies outweighed Opecs decision not to cut production further. US stocks on Monday extended their recovery after major British Banks joined their US counterparts in hailing a strong start to 2009. US light crude settled up $1.10 at $47.35 per barrel after falling to as low as $43.62 earlier.
London Brent crude, which expires Monday, settled down 95 cents, at $43.98. "With the Opec headline risk now behind the markets, we believe Opecs decision not to cut production is a sign of strength, not weakness, and expect the markets to rally in conjunction with the global equity markets," said Chris Jarvis, senior analyst, Caprock Risk Management, Hampton Falls, New Hampshire.
Oil has tumbled $100 from highs above $147 in July last year as the global economic meltdown has dented demand for oil worldwide. An attack by suspected Nigerian militants on a Chevron oil pipeline in the Niger Delta shut down around 11,500 barrels per day of output, the company said.
In the oil rich Middle East, US forces shot down an unmanned Iranian aircraft in Iraqi airspace last month, US and Iraqi officials said, an incident that highlights deep US-Iranian tensions. The Organisation of the Petroleum Exporting Countries met on Sunday and decided not to cut output further, but rather concentrate on existing cuts that total 4.2 million barrels per day since September. The oil producing groups compliance with current cuts is estimated at about 80 percent.
Full compliance would take 800,000 barrels per day off the market. Some analysts said Opecs adherence to the existing cuts might be enough to offset falling demand and reverse the recent increases in oil inventories in many countries, including the worlds largest oil consumer, the United States.
"We believe the cuts made to date, coupled with falling non-Opec output, could already be enough to offset weaker demand and result in observable inventory declines in the coming months," investment bank Collins Stewart said in a research note. Ali al-Naimi, the oil minister of the worlds top oil producer and Opecs most influential member Saudi Arabia, said he was very happy with Opecs decision.
Opec producers said they would meet again at the end of May to review progress. In a preliminary Reuters poll ahead of the EIA inventory report released Wednesday, analysts forecast a 0.5 million-barrel rise in US crude stocks for the week ending March 13, a 300,000-barrel rise in distillate stocks and a 1 million barrel fall in gasoline stocks.