The oil cartel is seen slashing output by 7.3 percent when it meets Dec. 17, the biggest supply reduction in a decade as the global recession batters demand. One analyst sees crude possibly sliding to — horrors! — $30 a barrel.
Morning Call: December 15
OPEC, the producer of 42 percent of the world’s oil, may make the biggest supply cut in a decade to halt the plunge in crude prices as demand drops for the first time since 1983.
The Organization of Petroleum Exporting Countries will probably lower output targets by at least 2 million barrels a day, or 7.3 percent, when its members meet Dec. 17, according to 18 of 33 analysts surveyed by Bloomberg. While Saudi Arabia’s King Abdullah said last month that his country needs oil priced at $75 a barrel to spur development, Goldman Sachs Group Inc. predicts crude may slide to $30 from $46.28 today.
Oil’s $100 a barrel collapse since July ended a windfall that quadrupled OPEC export revenue in five years, instead creating government budget shortfalls. Ecuador, a member of the group, said last week it will default on foreign debt. The U.A.E., Kuwait and Qatar need crude above $55 to balance their current accounts and fiscal spending, Citigroup Inc. estimated.
“There is a real danger of oil going down to $30 a barrel unless OPEC acts boldly and decisively,” said David Hufton, managing director of PVM Oil Associates Ltd. in London, the world’s largest broker of over-the-counter crude trading between banks, hedge funds and oil companies.
Prices tumbled from a record $147.27 on the New York Mercantile Exchange in July to a four-year low of $40.50 just five months later. Crude for January delivery rose as much as $2.72, or 5.9 percent, to $49 a barrel in electronic trading on the New York Mercantile Exchange. It was at $48.54 at 11:14 a.m. in London.
Trader Daily � OPEC Eyes Big Crude Cut