The price of oil continued to firm here on Wednesday amid mounting expectations that the Organisation of Petroleum Exporting Countries will decide to slow down its pumps when it meets later in the month.
Benchmark Brent North Sea crude for February delivery was being traded at $24.52 a barrel here by late afternoon, up from $24.30 at the close on Tuesday.
In New York, the reference light sweet crude February contract had closed up 41 cents at $27.21 a barrel overnight.
Prices have tumbled in recent weeks as concerns that the market would dry up over the northern hemisphere winter evaporated amid signs of building stocks.
But the price slump has left the oil-exporting OPEC club anxious to avoid a price collapse when winter thaws in the major consumer nations.
OPEC member Kuwait said on Wednesday that the group was likely to cut production by two million barrels a day in a bid to prop up prices.
"The overall cuts in crude production within OPEC and outside the organisation will probably amount to two million barrels" a day, Kuwaiti Oil Minister Saud Nasser al-Sabah was quoted as saying in local newspapers.
Robert Laughlin, a market watcher with the GNI brokerage, said: "The market is absorbing news that OPEC is certainly likely to cut production at their January 17 meeting."
"It's a matter of how much. The Saudis and the Kuwaitis have called for cuts of approximately a million to 1.5 million barrels a day. "That is why the market is higher than it was late last week."
On Tuesday, OPEC said that its benchmark price used to help set output quotas had remained below its target band of $22-28 for over a week.
Under the agreement, the organisation pledged to increase production by 500,000 barrels a day if its benchmark price stayed above $28 for 20 working days, or cut output by the same amount if the price stayed below $22 for more than 10 working days.
Had the price rested below $22 until January 8, it would have been outside of the band for 10 working days.
But OPEC announced on Wednesday that the benchmark price had risen back above $22.
Analysts said they did not therefore expect the mechanism to trigger an output cut ahead of the Vienna ministerial meeting, but added that it seemed increasingly likely that the group would decide to tighten its taps at the meeting.
In the meantime, with the US Northeast in the grips of a bout of particularly cold weather, market players were waiting with bated breath for the latest snapshot on US stock levels from the American Petroleum Institute (API).
GNI's Laughlin said that he thought Brent prices could rise as high as $25 a barrel in late trade on Wednesday.
"Whether or not it will be able to stay above it will depend on the big API stock figures that are announced tonight after the (London) market closes," he said.—AFP.
©--Agence France Presse.
© 2001 Mena Report (www.menareport.com)
