Oil: Prices hold strong as Opec promises price defence

Oil prices steadied on Friday after a five per cent surge on Thursday as Opec producers signalled their readiness to support prices by cutting supply.

US crude futures rose 14 cents to $45.70 a barrel while London Brent crude was up 40 cents at $43.25 a barrel.

"Three factors tip the month towards the bullish side," said Edward Meir of Man Energy.

"Look for an eventual turn in the weather in the US Northeast towards the colder side after a stretch of relatively mild weather, an uncertain election outcome in Iraq on January 30 and the possibility of yet another cut from Opec."

A near 20 per cent drop in oil prices since late October's record highs has alarmed Opec members, who fear that rising energy inventories could further lower prices if the northern winter continues to be mild.

Iranian Oil Minister Bijan Zanganeh said on Friday Opec should take action at its Jan. 30 meeting if oil fell under $40 a barrel, effectively setting a higher threshold for output cuts by producing countries.

A cutback of up to 1.5 million barrels per day (bpd) could be made to official output limits, in the event of a sub-$40 US oil price, an Opec source also said.

"We should be very concerned about the market. It needs action," Zanganeh told reporters in India. But he added: "I don't think prices will quickly go below $40."

Opec's biggest producer Saudi Arabia, keen to prevent damage to world economic growth, is thought unlikely to support output cuts with prices at $45 a barrel.

Thursday's sharp price rise was partly due to a brief cold snap in northeast United States, which has enjoyed relatively mild weather so far this winter, easing the strain on low heating oil inventories.

Supply concerns also dog exports from the North Sea where about 350,000 bpd of crude production remains shut in.

Continuing violence in Iraq ahead of elections scheduled for later this month has also helped to staunch the selling.

Iraqi officials told Reuters in Baghdad that crude exports via the northern route to Turkey would not resume for at least 10 more days as repairs continued on the sabotaged pipeline.

- REUTERS