LONDON (Reuters) – Oil rose above $50 a barrel on Monday as investors eyed the prospect of a further OPEC supply cut to prop up prices that have been pressured by weakening global demand.
Venezuela said on Sunday the Organization of the Petroleum Exporting Countries should cut supply further, while Iran made similar remarks on Monday. OPEC oil ministers meet for informal talks in Cairo on November 29.
“The demand scenario suggests we need another cut. But at the end of the day, there is a certain skepticism in the marketplace that OPEC is going to deliver at this weekend’s meeting,” Rob Laughlin, broker at MF Global, said.
U.S. crude rose 55 cents to $50.48 by 6:05 a.m. EST, off an earlier high of $51.34. The contract dipped to a 3-1/2-year low of $48.25 on Friday. Brent crude was up 65 cents at $49.84.
The U.S. government’s bailout plan for Citigroup Inc, its biggest rescue of a bank yet, boosted equities and supported some commodities but had little impact on oil prices.
Nonetheless, some traders said rising equities and increased demand for winter heating fuel should bolster oil. The UK’s FTSE 100 index of top shares gained almost 4 percent.
“The FTSE is up so that should provide support, as should the colder weather,” said Christopher Bellew, a broker at Bache Commodities. “All the considerable amount of bearish data may finally be priced in.”
Analysts said the market would be eyeing Obama’s announcement of his economic team later in the day, as he worked on a stimulus plan designed to lift the country out of its worst financial crisis in decades.
Oil has plummeted nearly $100 a barrel since its record high of $147.27 in the summer as the high prices of earlier this year and the recent credit crisis hit demand in the United States, Europe and parts of Asia.
Venezuelan oil minister Rafael Ramirez urged OPEC on Sunday to agree to cut supply by 1 million barrels per day (bpd) at the emergency meeting in Cairo and make the cut take effect before the end of the year.
The comments were echoed by Iran’s OPEC governor, who said in remarks published on Monday that OPEC needs to reduce output further.
OPEC has not called a full-blown policy meeting in Cairo, but ministers are to gather informally on the sidelines of a gathering of Arab oil ministers. After that, OPEC holds a formal meeting on December 17 in Algeria.