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Oil rises above $48 ahead of OPEC meeting

Firmer European equities and a weaker dollar also lent support to oil, which has fallen $100 from a record high of more than $147 in July, as the global financial crisis has started to impact demand for fuel.

Goldman Sachs has predicted oil could fall as low as $30.

US light crude for for January delivery was up $2.36 at $48.64 a barrel by 1045 GMT. It has bounced back from its lowest in about 4 years of $40.50 a barrel on Dec. 5.

London Brent crude gained $2.32 to $48.72.

Members of the Organization of the Petroleum Exporting Countries are in agreement on the need to cut output when they meet on Wednesday in Algeria, OPEC President Chakib Khelil has said, but he declined to say by how much.

‘We think should OPEC go for anything less than 2 million barrels a day, participants would be inclined to use this as a selling opportunity,’ said Edward Meir of MF Global in a research note.

‘The cartel is simply too far behind the curve to consider anything less than that,’ he said.

Since early September, OPEC has said it would reduce supply by a total of 2 million bpd but prices have continued to fall.

DEMAND SLUMPS

OPEC member Iran, the world’s fourth biggest oil producer, has proposed cuts of between 1.5-2 million bpd.

‘With global oil demand expected to continue falling through much of 2009, the pressure is on the cartel as well as non-OPEC producers such as Russia to remove excess production from the market,’ said Jonathan Kornafel, Asia director of Hudson Capital Energy in a note.

There is already plenty of evidence that the world economic downturn has dampened demand for oil.

In China, the world’s second biggest energy consumer, implied oil demand shrank by about 3.5 percent in November from the year before, the first decline in nearly three years, Reuters calculations showed.

The weak dollar, which hit a two-month low against euro, plus buoyant equities helped support oil.

‘It’s also getting support from the dollar’s weakness against the euro and the yen at the start of the week,’ said Ken Hasegawa, a commodity derivatives sales manager at broker Newedge in Tokyo.

European equities rose initially following gains in Asia, with Japan’s benchmark Nikkei 225 Index jumping 5.2 percent on hopes of a lifeline for the struggling US auto industry.