Oil prices rebounded sharply on Monday on forecasts of a blast of cold weather in the US Midwest and a crescendo of whispers that OPEC may pump less oil from January, analysts said.
Benchmark Brent North Sea crude for delivery in February rose to $26.67 a barrel in late deals, from $25.89 at Friday's close.
In New York, the reference light sweet crude January contract was going for $29.65 a barrel, from $28.87 at the close on Friday.
"Further cold is forecast for the next few weeks in the United States," the GNI brokerage said. "There is also an element of bargain hunting about the recent recovery, which is not surprising after such a sharp fall in prices and increasing talk that OPEC may look to cut output as early as January," it added.
The Organisation of Petroleum Exporting Countries is scheduled to meet again on January 17 to discuss production quotas.
It no longer faces calls for the production increases that consumer nations were crying out for this autumn as crude prices soared to 10-year highs in excess of $35 a barrel.
Analysts now believe that a production cut is now more likely next, a prospect that was boosted on Monday when OPEC said that its basket oil price, used to help set output, had fallen to $22.92-- close to the bottom of its target band of $22-28.
Under an informal price-band mechanism agreed in March, the organization agreed to increase or decrease output by $500,000 a day if the price persists above or below the target band.
But although OPEC has hinted that a production cut could be on the cards, it has not yet given any clear indication of when the move might be expected.
Indeed, some market watchers have suggested there may be disagreements within the exclusive oil-producing club over quotas, an idea that Kuwaiti Oil Minister Sheikh Saud Nasser al-Sabah sought to dispell on Monday when he denied that Kuwait was at loggerheads with Saudi Arabia over the issue of cuts.
"Kuwait and Saudi Arabia have never been any day in dispute over oil," Sheikh Sabah said.
The latest remarks followed comments last week from the Kuwaiti oil minister suggesting that it was "almost certain" that an agreement on reducing production would be reached in January. "About one million barrels a day will be taken away if it is necessary," he said.
But later the same day, Saudi Oil Minister Ali al-Nuaimi said it was too early to talk of a cut in output.
Nevertheless, many analysts foresee a sharp fall in prices as winter draws to an end unless OPEC tightens its taps.
"If temperatures do not drop in the first quarter 2001 then prices will indeed fall heavily during the year, assuming Iraq's exports are restored before January," the Centre for Global Energy Studies said on Monday.
Assuming a 'normal winter,' an OPEC production cut of 1.3 million barrels a day from the first quarter 2001 would see Brent prices fall to $19 a barrel on average over the summer, rebounding to $22 in the fourth quarter, it predicted.
But should the winter prove to be unusually cold, such a cut would "return us to the brink of shortage," the think-tank said in its Monthly Oil Report.
"OPEC will need to react promptly to signals from the market in 2001, rather than wait for clear indications of stock levels, something it has found difficult to achieve in recent years," it said.—AFP.
©--Agence France Presse.
© 2000 Mena Report (www.menareport.com)
