Oil up as OPEC mulls production cut
SIOUX FALLS, S.D. - Oil prices rebounded from four-year lows and shot above $43 a barrel yesterday as OPEC floated the possibility of a "severe" production cut and several countries disclosed new measures to boost their economies.
Chakib Khelil, the president of the Organization of the Petroleum Exporting Countries, said Saturday the cartel could reveal a "severe" reduction of output quotas at its next meeting on Dec. 17 in Algeria.
Light, sweet crude for January delivery gained $2.90 to settle at $43.71 a barrel on the New York Mercantile Exchange. On Friday, the contract dropped nearly $3 to settle at $40.81 and prices fell as low as $40.50, levels last seen in December 2004.
Khelil would not specify how deep the output cut would be, but noted that some analysts are predicting a decrease of up to 2 million barrels per day.
OPEC disclosed a production cut of 1.5 million barrels a day in October and investors largely ignored it, focusing instead on a global economic slowdown that has weakened crude demand.
Oil prices were also buoyed by gains in the equity markets.
The Dow Jones industrial average gained more than 300 points yesterday after President-elect Barack Obama disclosed over the weekend plans for the largest US public works spending program in 50 years.
European and Asian stock markets surged on reports that China and India will look at new steps to boost their economies.
And the national average for regular gas fell nearly 2 cents overnight to $1.716 a gallon, according to auto club AAA, the Oil Price Information Service, and Wright Express.