Oil Trades Near $47 After Surging as OPEC Weighs Production Cut

March 13 (Bloomberg) -- Crude oil traded near $47 a barrel in New York, after posting the biggest gain in three weeks yesterday, as OPEC prepares to meet this weekend to consider a fourth production reduction.

The global oil market is oversupplied and OPEC will cut output if needed, Shokri Ghanem, who chairs Libya’s state-run National Oil Corp., said yesterday. Other ministers have called for the group to halt reductions.

“OPEC is weighing the likelihood that they may have to remove more barrels from the market during the second quarter if they want to support prices,” said Adam Sieminski, the chief energy economist at Deutsche Bank AG in Washington. “They want to be careful, given the fragile state of the global economy.”

Crude oil for April delivery fell 38 cents to $46.65 a barrel at 9:59 a.m. Sydney time on the New York Mercantile Exchange. Yesterday, futures rose $4.70, or 11 percent, to settle $47.03 a barrel, the biggest gain since Feb. 19. Prices are up 5.4 percent so far this year.

Futures had dropped 7.4 percent on March 11 after a U.S. government report showed a bigger-than-expected inventory gain. Daily crude-oil price swings are widening. Futures fell or rose by 4 percent or more on 24 trading days since the beginning of the year, compared with three days in the same period last year, according to data complied by Bloomberg.

Oil also gained yesterday as U.S. equities rose for a third day. Stocks were buoyed as General Electric Co. said the loss of its top credit rating at Standard & Poor’s won’t hurt business, and Bank of America Corp. said it was profitable in January and February. The S&P 500 Index increased 4.1 percent to 750.74.

Lower Target

OPEC has reduced daily output targets by 4.2 million barrels since September. Ministers will meet in Vienna on March 15 to discuss whether to make further cuts.

“It looks like the market is chopping around now ahead of this weekend’s OPEC meeting,” said Tom Bentz, a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. “It doesn’t look like there will be a cut, but you never know for sure.”

Nigeria is opposed to further oil supply reductions by OPEC countries at this month’s meeting, a spokesman for the state oil company said yesterday. Qatari Oil Minister Abdullah bin Hamad al-Attiyah said earlier this week that the group needs to reach full compliance before any new action.

The 11 OPEC members with quotas, all except Iraq, produced 25.39 million barrels a day in February, down from 29.22 million barrels a day in September, according to a Bloomberg News survey of oil companies, producers and analysts. The group agreed to pump 24.845 million barrels a day starting Jan. 1.

Better Compliance

“OPEC is doing a better job in complying with its production targets than in the past,” Sieminski said. “They may decide that everyone should buckle down and strictly adhere to the quotas.”

Oil prices have touched their lowest point for the year and are set to rebound above $60 a barrel because of resilient demand and OPEC cuts, a Standard Chartered Plc trader said.

“We have seen the lows in crude oil prices for this year,” Morgan Downey, Standard Chartered’s New York-based head of commodity trading in the Americas, said in a Bloomberg Television interview. “There will be a slow but steady increase in prices.”

The direction oil prices take will depend more on a meeting of world leaders in London on April 2 than on what OPEC decides this weekend, Daniel Yergin, chairman of Cambridge Energy Research Associates, said in an interview this week at the Futures Industry Association annual conference in Boca Raton, Florida.

‘Great Recession’

“GDP is going to determine the price,” said Yergin, author of a Pulitzer-Prize winning history of oil. “We’re now in the Great Recession, and that’s what the price reflects.”

Brent crude oil for April settlement increased $3.69, or 8.9 percent, to end the session at $45.09 a barrel on London’s ICE Futures Europe exchange yesterday.

The price of oil on the Nymex for delivery in May is 87 cents higher than for April, compared with a premium of 94 cents a barrel yesterday and down from a $2.66 premium March 11. December futures are $5.95 higher than the front month. The narrowing of the spread between the contracts has coincided with falling inventories at Cushing.

“The April contract is leading the way higher,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “It looks like nobody wants to be short going into this weekend’s meeting.”