Crude Oil Declines After OPEC Leaves Output Quotas Unchanged

March 16 (Bloomberg) -- Crude oil slumped as much as 5 percent in New York after the Organization of Petroleum Exporting Countries decided against deeper output cuts that may have damaged the global economy.

OPEC yesterday deferred another reduction for at least 11 weeks while member states complete cuts agreed in December. Nigeria has returned to normal contract terms for exports from the Bonny and Forcados fields, Mohammed Barkindo, head of the state-owned national petroleum company said yesterday, restoring supplies from Africa’s largest producer.

“A lot of people would have been surprised by OPEC’s lack of action,” said Toby Hassall, research analyst at Commodity Warrants Australia Pty in Sydney. “It’s quite bearish.”

Crude oil for April delivery fell as much as $2.40, or 5.2 percent, to $43.85 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $44.43 at 7:40 a.m. Singapore time.

The contract fell 1.7 percent to $46.25 on March 13 after OPEC and the International Energy Agency each lowered their demand forecasts for 2009, citing the global recession.

OPEC pumps 40 percent of the world’s oil and has reduced daily output targets by 4.2 million barrels since September to prevent a glut and slow the decline in prices. The 11 member- states subject to quotas are still producing about 800,000 barrels a day more than the group agreed in December.

Compliance, Brent

“We need to adhere and then in May we can look if other measures can be taken,” OPEC President Jose Maria Botelho de Vasconcelos said yesterday.

Brent crude oil for April settlement fell $1.43, or 3.2 percent, to $43.50 a barrel on London’s ICE Futures Europe exchange. The contract, which expires at the close of trading today, fell 16 cents, or 0.4 percent, to $44.93 on March 13.

The more actively traded May contract fell 3.6 percent to $44.21 a barrel after falling 0.7 percent on March 13.

At the start of March, 31 of 41 analysts surveyed by Bloomberg News were expecting OPEC to cut output by as much as 1.5 million barrels. That consensus diminished last week as some OPEC ministers urged greater compliance from fellow producers before setting further reductions.

Hedge-fund managers and other large speculators last week increased their bets on falling oil prices for a second week, according to U.S. Commodity Futures Trading Commission data.

Speculative net-short positions, the difference between contracts to buy and sell the commodity, jumped 11-fold to 6,015 contracts on March 10, the commission said March 13.

Demand Outlook

New York futures have fallen 70 percent from their $147.27 record on July 11 as slowing world growth forced the International Energy Agency to revise its demand outlook for seven straight months. Oil reached a four-year low of $32.40 on Dec. 19.

Finance ministers from the 20 largest economies yesterday pledged a “sustained effort” to cleanse banks of bad assets and free up global lending. A report today in the U.S., the world’s largest oil consumer, will probably show industrial production fell 1.3 percent in February, the sixth decline in seven months, according to a Bloomberg News survey of economists.

Macro-economic reports aren’t likely to provide support for oil any time soon and yesterday’s OPEC decision will probably leave prices to “range-trade” between $40 and $50, Commodity Warrants’ Hassall said.

“If we can get full compliance on the previous output cuts, that will continue to take some of the excess supply out of the market,” he said. “Inventories in the U.S. have started to level-off somewhat.”

U.S. crude oil inventories in the U.S. stalled at about 351 million barrels the past five weeks, after climbing 9 percent in January.