Oil: Opec to meet Thursday on cuts

Oil rose above US$59 a barrel on Monday as producer group Opec prepared for an emergency meeting to finalize a cut in output.

US light crude for November delivery rose 64 cents a barrel to US$59.21 by 1710 GMT. In London, Brent crude rose 18 cents to US$59.70.

Ministers from the Organisation of the Petroleum Exporting Countries were due to meet on Thursday in Qatar to finalize a deal to cut production to stem oil's rapid slide from July's record price of US$78.40 a barrel.

Prices have been declining due to robust energy inventories in the United States and concerns that economic growth may slow, slicing into oil demand.

Opec, which supplies a third of the world's oil, has been wrangling for two weeks whether to make the cut from its official output target of 28 million barrels per day or from actual production of around 27.5 million bpd.

"The market will move on Opec announcements, now that the meeting has been agreed for Thursday," said Frederic Lasserre of SG CIB Commodities. "A clear, concise agreement on a cut might be bullish in the short-term."

Most members have been pumping at or above their individual Opec quotas to meet global demand growth.

But Indonesia and Venezuela have fallen well below theirs and Iran has had difficulty matching its limit, making them reluctant to cede market share to their peers by cutting from actual output.

The disagreement has hurt Opec's credibility with investors, said Lasserre.

"We think that Opec has effectively failed this test," he said. "They may have to make another cut in December, partly to reassure the market that its statements on cuts are credible and that the group will defend a certain floor in prices."

Opec cut its forecast for demand for its crude in the last three months of 2006 in its October report on Monday and said that price weakness may persist.

The group said demand for its crude in the fourth quarter would average 170,000 bpd less than it forecast in its last monthly report.

"Uncertainties about global economic prospects, particularly in the USA, slowing demand growth, rebounding non-Opec supply and high stock levels have triggered a strong bearish sentiment in the market," the report said.

Iran, the world's No. 4 exporter, could move back onto the market's radar screen this week as the European Union's 25 foreign ministers appear set to agree at a meeting on Tuesday to ask the UN Security Council to impose sanctions.

Meanwhile, Norwegian authorities said Royal Dutch Shell could restart its 80,000 bpd Draugen oil field earlier than expected on Monday.

Prices rallied on Friday after Shell and Statoil said they would shut 280,000 barrels of oil equivalent per day of output for a week or two to improve lifeboat safety as demanded by regulators.

Authorities have yet to grant Statoil permission to restart its larger field.

- REUTERS