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Updated Tuesday, December 16, 2008 9:35 am TWN, AFP

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Oil surges past US$50 as cut looms

LONDON -- The price of New York crude oil soared above US$50 per barrel to a two-week high point on Monday, as the market was driven by expectations that OPEC will cut crude output this week, traders said.

Light sweet crude for delivery in January delivery jumped to US$50.05 per barrel, hitting the highest level since December 1 on the New York Mercantile Exchange (NYMEX).

On London's InterContinental Exchange (ICE), Brent North Sea crude for January leapt as high as US$49.96 a barrel, which was also a two-week pinnacle.

"Crude prices pushed higher on hopes of hefty supply cuts by OPEC," said Nimit Khamar, analyst at the Sucden brokerage in London.

Despite the bumper gains, prices have shed about two-thirds in value since striking record highs above US$147 five months ago.

The Organization of Petroleum Exporting Countries (OPEC) meets in Oran, Algeria, on Wednesday and is widely forecast to slash output in the hope of lifting prices weighed down by mounting global recession worries.

OPEC Secretary General Abdalla Salem El-Badri told reporters on his arrival in Oran on Monday that he would like to see "a very sizeable cut" in crude oil production, adding that "the market is oversupplied with oil."

Prices later pulled back slightly, with New York crude at US$49.29, up 3.01 from Friday's close. Brent oil was US$2.84 higher at US$49.25 a barrel.

The market was also lifted by hopes that the White House could come to the rescue of the struggling U.S. auto sector, dealers said.

Victor Shum, analyst with energy consultancy Purvin and Gertz, said prices were "bouncing back up because there are expectations that the U.S. automakers may get rescued after all, this time by the White House."

He added: "There are also expectations that OPEC will make a substantial cut later this week when they meet.

"So these two factors have help reduced the worries about the (weak) global economy slowing down demand for oil."

El-Badri's remarks underpinned speculation that OPEC ministers would take action to boost prices, which have plunged by as much as 70 percent since reaching all-time highs of above US$147 a barrel in July.

Analysts are forecasting a cut of between one million and two million barrels from OPEC's official daily output quota of 27.3 million barrels, excluding Iraq.

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