Oil prices bounced back from a 19-month low yesterday on worries producer group Opec would deepen its supply cuts to stem a 15 per cent slide since the start of the year.
US crude rose 72 cents to $52.60 a barrel, after falling briefly to $51.65, the lowest level since late May 2005. London Brent rose 90 cents to $52.60 a barrel.
"There is short covering ahead of the long weekend along with concern about the possibility of a surprise Opec meeting," said Nauman Barakat, senior vice president at Macquarie Futures USA. Floor trading at the New York Mercantile Exchange will be closed on Monday for Martin Luther King Day.
Oil prices had been in steady decline over the past two weeks, losing nearly $9 a barrel, on fund selling and mild weather that has cut heating fuel demand in the world's top energy consumers.
The slide, the biggest two-week drop in two years, rang alarm bells for Opec, which has been cutting output since autumn to stem crude's losses from record heights near $80 last summer. Opec president Mohammed al-Hamli, also the UAE oil minister, said on Thursday that the group is deeply concerned by the drop in oil prices this year and stands ready if necessary to bolster the world market. Opec first pledged to implement a 1.2 million barrel cut from November 1st, increased to a 1.7 million cut from February 1st to shore up prices.
"People have figured out that there might be some Opec action this weekend. They may consult by phone and decide to hold an emergency meeting," said Tony Nunan, manager at Tokyo-based Mitsubishi risk management unit.
The New York Mercantile Exchange set daily volume records of more than 800,000 crude contracts on Thursday, signalling that investors were not fleeing oil but betting that prices would fall further.
"The dramatic and impulsive decline suggests that the downside remains in focus," Barclays Capital analysts said in a report. "Beyond the short term, in the absence of a run above $57.50, crude oil remains vulnerable to the downside and further weakness towards $50 over the rest of the month."
