Oil rose above US$50 (Dh184) a barrel on Friday, rebounding from a three and half year low and buoyed by rallies in Europe and Asian equities on talk that China may cut interest rates later in the day. Oil has fallen by 11 per cent this week taking it close to a $100 drop from its July record high and setting it on course for the steepest weekly decline since the beginning of October. US light crude rose 96 cents to $50.38 a barrel, its first increase after five straight sessions of losses. Earlier it fell to $48.25, the lowest in three and a half years. London Brent crude gained $1.40 cents to $49.48 a barrel.
European and Asian shares bounced on Friday as expectations China may cut interest rates later in the day prompted investors to cover short positions before the weekend. "The move through $50 on January US crude yesterday may have been the final push to the downside and if equities can improve a bit we could see that all the considerable amount of bearish news is finally priced in," said Christopher Bellew at Bache Commodities.
Oil has lost two thirds of its value in just under four months since peaking above $147 in July as the financial crisis grips economies around the globe and limits demand for fuel. Reflecting the sharp reversal in oil's fortunes, Goldman Sachs, which in May had been talking of a $200 a barrel superspike, again cut its 2009 forecast for US crude oil to $80 a barrel from $86 on Thursday. As demand tumbles, oil companies plan to store millions of barrels of crude in the hope economics will improve.
Shipping brokers said US oil trader Koch and Royal Dutch Shell had booked supertankers capable of storing 10 million barrels of crude, more than top exporter Saudi Arabia produces in a day. The steep fall in oil prices has brought more Organization of the Petroleum Exporting Countries (Opec) members out in support of further output cuts. Libya's top oil official said the producer group may decide to reduce supply further at its informal meeting in Cairo next week if it finds members have implemented a previous decision to lower output.
The comments followed similar remarks from other Opec members, including Kuwait, Iran and Venezuela, raising the possibility of a further cut in supply to prop up oil prices. Industry consultant Petrologistics said it estimates Opec oil production will fall by 1.22 million barrels per day in November. Opec agreed in October to cut output by 1.5 million barrels per day, about 5 per cent, from Nov 1, but the move has failed to stem the decline in oil prices.