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Oil up as OPEC may cut more

CRUDE oil rose for a second day yesterday after the Organization of Petroleum Exporting Countries said it may deepen output cuts to bolster prices.

OPEC members Saudi Arabia and Venezuela signaled yesterday that output will be reduced further. Saudi Arabian Oil Minister Ali al-Naimi said February output will be "lower than the target" set at the group's December 17 meeting. The United States Energy Department was expected to say yesterday that crude oil stockpiles gained a third week, according a Bloomberg News survey.

"OPEC's policy right now is to verbally intervene in order to influence the market," said Bayram Dincer, a commodity analyst at Dresdner Bank AG in Zurich. "Today (Wednesday), prices are responding to their talk about production cuts."

Crude oil for February delivery rose as much as US$1.67, or 4.4 percent, to US$39.45 a barrel and was at US$39.35 at 6:16am London time yesterday on the New York Mercantile Exchange. Oil has tumbled 59 percent in the past year as fuel demand falls because of a global recession.

Brent crude oil for February settlement gained as much as US$1.17, or 2.6 percent, to US$46 a barrel on London's ICE Futures Europe exchange. The contract expires today.

The more active March contract was at US$48.36 a barrel, up 92 cents, at 9:18am London time yesterday.

Saudi Arabia is now producing 8 million barrels a day, about level with its target of 8.051 million barrels a day, al-Naimi said on Tuesday.

Oil ministers from OPEC agreed in Oran, Algeria, to cut supply by 9 percent to 24.845 million barrels a day starting January 1.

"We're willing to cut 2 million more, 4 million more barrels to preserve the price of oil," Venezuelan President Hugo Chavez told the National Assembly in Caracas on Tuesday.

The group needs to make the deepest supply cuts in its history to comply with the new target. The 11 OPEC nations with quotas produced an average of 27.45 million barrels a day in December, according to data. US crude-oil stockpiles probably gained 2.75 million barrels in the week ended Friday, according to analysts in a Bllomberg News survey.


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