Oil falls below $45 as OPEC doesn’t cut supply

March 16, 2009 | By admin |

SINGAPORE — Oil prices fell below $45 a barrel in Asia on Monday after OPEC decided not to cut production levels at its meeting over the weekend in Vienna.

Benchmark crude for April delivery fell $1.88 to $44.37 a barrel by midmorning in Singapore on the New York Mercantile Exchange. Oil prices dropped 78 cents on Friday to settle at $46.25 a barrel.

Members of the Organization of Petroleum Exporting Countries said Sunday they would strive to adhere more closely to the group’s current output quotas. OPEC is overshooting its daily target level of just under 25 million barrels a day by about 800,000 barrels.

Prices had risen from under $35 a barrel last month as investors anticipated OPEC would cut production by up to 1 million barrels a day on top of 4.2 million barrels of reductions announced since September.

“The gains we’ve seen in oil over the last two or three weeks were from pricing in a further cutback, which didn’t come through,” Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne. “So now we’re seeing some profit-taking.”

Also on Sunday, Russian Deputy Premier Igor Sechin said his country, the world’s second largest producer after Saudi Arabia, would reduce crude sales. Analysts were skeptical Russia would follow through with production cuts given the country’s reliance on oil income.

“Russia tends to be more talk than action than OPEC,” Pervan said. “I think they’d be pretty hesitant to bring volumes down, but it’s worth watching.”

Oil traders will likely turn their attention to global crude demand and the possibility of a second-half economic recovery.

Federal Reserve Chairman Ben Bernanke said Sunday on CBS’ “60 Minutes” that America’s recession “probably” will end this year if the government succeeds in bolstering the banking system.

However, Bernanke said that even if the recession, which began in December 2007, ends this year, the unemployment rate will keep climbing past the current quarter-century high of 8.1 percent.

“The market now doesn’t have that supply-side issue to support it,” Pervan said. “There’s more downside risk now that the focus is shifting from supply to demand issues.”

“All we need to see is one or two weak numbers out of the US, and we’re right back into the low $40s and high $30s.”

In other Nymex trading, gasoline for April delivery fell 3.04 cents to $1.32 a gallon, while heating oil dropped 3.18 cents to $1.17 a gallon. Natural gas for April delivery was down 4.1 cents to $3.89 per 1,000 cubic feet.

Brent prices fell $1.60 to $43.33 on the ICE Futures exchange in London. - AP