OPEC set to cut output as prices drop to 3-year low

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“For sure we will cut in Oran (Algeria),” Abdullah Al-Attiyah told reporters on the sidelines of a petrochemical conference in Dubai. “I don’t know by how much. We will discuss it there.”

US crude settled below $ 47 a barrel on Tuesday, the lowest close since May 2005 and over $ 100 below the peak in July. The impact of the growing global economic crisis on oil demand and OPEC’s inaction at informal talks in Cairo at the weekend have pushed prices lower this week.

Attiyah said on Tuesday that OPEC was concerned about a glut of crude supplies on the market. He reiterated that a price of under $ 70 a barrel was threatening to derail projects to boost oil and gas capacity. Oil has stayed below $ 70 since Nov. 5.

“My concern is that the oil price will go lower,” Attiyah said. “And many projects will be delayed.”

Oil prices fell Wednesday in New York to the lowest level since February 2005 as the market focused on declining demand in the face of a barrage of weak global economic news.

On the New York Mercantile Exchange, a barrel of light sweet crude for January delivery dropped to $ 46.79, down 17 cents from Tuesday’s close.
The New York contract hit an intraday low of $ 46.26 and in London, Brent North Sea crude for January delivery fell as low as $ 44.87. The Brent contract settled unchanged at $ 45.44 on the InterContinental Exchange.
“Who could have imagined on the 4th of July that oil prices would retreat $ 100 by Thanksgiving?” said Mike Fitzpatrick, analyst at MF Global.

“That knowledge alone might have kept consumers’ hopes afloat enough to stave off the current gloom that seems to have descended over most financial markets,” he said.

“The rallies we’ve seen have been false rallies, relief rallies,” said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne. “The mood is overwhelmingly bearish at the moment.” Investors have been discouraged by growing evidence that China’s economy, the world’s fourth largest, may slow more than previously expected. Property prices in China have plunged, leading analysts to expect a drop in construction, an important driver of Chinese growth.

“The gloomy economic outlook and the resulting sluggish demand picture remain one of the major reasons for the slump in oil prices,” said a report by JBC Energy in Vienna, Austria.

The World Bank last week cut its 2009 Chinese growth forecast to 7.5 percent, the slowest in almost two decades.

Saudi Arabia said oil prices needed to return to $ 75 to keep the more expensive projects at the margins of world supply on track.

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