Oil: Opec set to cut output

Oil rose to above US$61 a barrel on Monday as Opec moved closer to cementing a deal to cut output by 1 million barrels per day and after North Korea said it had conducted its first nuclear test.

US crude rose US$1.35 to US$61.11 a barrel by 1715 GMT, after losing 27 cents on Friday. London Brent crude gained US$1.64 cents to US$61.47.

"Opec is the main driver. If you are bullish on Opec, then North Korea just adds to the bullish atmosphere," said analyst Olivier Jakob of Petromatrix.

Ministers of the Organisation of Petroleum Exporting Countries are agreed on the need to trim its official output ceiling of 28 million bpd, a third of the world's oil, but are still divided over whether they need to meet to formalize a deal, delegates said.

"There is consensus on the cut, but we're still consulting about an emergency meeting," a senior delegate said.

Opec is due for a scheduled meeting on Dec. 14, but some members want to hold an emergency session this month. Others prefer to press on with the reduction without a face-to-face meeting.

Opec's move would expand on marginal supply cuts announced last month by Nigeria and Venezuela.

Saudi Arabia already has moved to cut supplies to its customers, shouldering the biggest burden of Opec's plan.

The kingdom will supply around 70 per cent of contracted volume to major oil companies, down from around 75 per cent in previous months, trade sources said.

Ample global fuel stocks have helped send oil prices more than 20 per cent lower since their record-high of US$78.40 a barrel in mid-July

North Korea's announcement of its first nuclear test rattled markets and boosted the dollar, as traders feared heightened regional tension and sanctions against the country.

"This is the sort of thing that causes tension in the world, and tension is associated with bumps upward in oil prices," said John Vautrain, vice president of energy consultancy Purvin and Gertz in Singapore.

"(But) it doesn't carry the same sorts of implications as if Iran tested a bomb. Any sort of sanctions would be immaterial to the flow of oil," he added.

Tehran insisted on Sunday it would not suspend atomic work, which it says is for peaceful purposes only, despite signs that world powers were close to agreeing on sanctions.

The United States, Russia, China, France, Britain and Germany agreed in London on Friday to discuss possible UN Security Council sanctions to punish Iran, Opec's second-biggest producer, for failing to heed demands to halt uranium enrichment.

- REUTERS