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Oil Falls Below $53 after Near-10 Percent Bounce - ASHARQ AL-AWSAT English Archive
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LONDON (Reuters) – Oil fell more than $2 to below $53 a barrel on Tuesday, unraveling a near-10 percent rally the previous session as optimism over the latest government bank bail-out dispersed.

Oil prices ended more than $4 higher on Monday after Washington agreed to pump $20 billion into struggling Citigroup, the second-largest U.S. bank.

U.S. light crude for January delivery was $2.35 lower at $52.15 a barrel by 5:43 a.m. EST, up from a three and half year low of $48.25 on Friday. London Brent crude was $2.13 lower at $51.80.

Monday’s strong gains, following a small rise on Friday, marked the first time since mid-September the oil market has risen for two days in a row. Oil has dropped by almost $100 from the record high above $147 hit in July.

“The effect of these financial packages tends to fade quite quickly,” said Michael Lewis of Deutsche Bank of the brief impact of government intervention.

He predicted prices had further to fall, possibly to as low as $30-$35 a barrel by the end of next year, and said any OPEC cuts would take time to take effect.

“Normally, it takes them about a year of cutting production, then the price starts to stabilize,” he said.

CAIRO MEETING

The Organization of the Petroleum Exporting Countries will meet informally in Cairo on Saturday only a month after it agreed to cut oil production by 1.5 million barrels per day (bpd) from November 1.

OPEC President Chakib Khelil said on Monday the current market weakness implied the need for a further reduction of more than one million bpd.

But, as the impact of existing curbs filters through only gradually, he said the supply demand balance would probably not be clear until the group’s official policy-setting meeting on December 17.

In the nearer term, the market could draw some support from colder weather, which would increase heating oil demand.

Expectations of cold weather in the United States was expected to drive demand for heating oil 10 percent above normal this week, according to the National Weather Service.

Ahead of the next set of U.S. government inventory data, analysts polled by Reuters predicted stocks of distillates — which include heating oil — would have fallen by 1 million barrels.

They expected the data for release on Wednesday would also show crude stocks had risen by 400,000 barrels and gasoline stocks by 700,000 barrels in the week to November 21.

Asharq Al-Awsat

Asharq Al-Awsat

Asharq Al-Awsat is the world’s premier pan-Arab daily newspaper, printed simultaneously each day on four continents in 14 cities. Launched in London in 1978, Asharq Al-Awsat has established itself as the decisive publication on pan-Arab and international affairs, offering its readers in-depth analysis and exclusive editorials, as well as the most comprehensive coverage of the entire Arab world.

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