Oil holds steady bracing for possible OPEC cut

Oil holds steady bracing for possible OPEC cut

LONDON (Reuters): Oil prices held firm on Tuesday amid growing
expectations that the OPEC cartel could curb supplies again.

London's Brent crude futures for April delivery traded one
cent lower at US$27.30 a barrel. U.S. March light crude was 34
cents stronger at $29.50.

Dealers said the market was firmly focused on the possibility
of a fresh OPEC oil production cut when the cartel holds a policy
meeting in Vienna next month.

OPEC is leaning towards another reduction because it fears an
economic slowdown will stunt demand for its crude, a Gulf source
familiar with policy in Saudi Arabia, the cartel's biggest and
most influential producer, said last week.

OPEC Secretary-General Ali Rodriguez said on Monday there was
"almost a conviction" among producers for a production cut ahead
of a forecast drop in demand in the second quarter of the year.

Rodriguez said the supply curb could be up to a million
barrels per day "in the worst case scenario."

There are fears among consumer nations that lower OPEC
supplies could lead to a price spike that could dent economic
growth.

Despite opposition from key consumers the United States and
Europe, OPEC slashed output by 1.5 million barrels per day (bpd)
in January to offset an expected seasonal fall in demand.

"There are worrying indications that OPEC hawks might see a
drop in the price of the basket below $25 a barrel as a signal
for further cuts," said the Center for Global Energy Studies in
its monthly oil report.

OPEC has a preferred price range of $22 to $28 for its basket
of seven crudes which on Monday was valued at $25.28.

Some OPEC hawks would prefer to defend a price nearer to the
top end of the range while the United States would prefer prices
at $20-$25 for light U.S. crude -- equivalent to $16-$21 for the
OPEC basket.

One dealer said an OPEC cut of about 600,000 bpd would be wise
given the International Energy Agency's (IEA) oil market report
last week which revised down the outlook for global oil demand
growth this year by 140,000 bpd to 1.5 million bpd.

"It is probably a fairly sensible measure given the demand
situation. You have the IEA reducing demand figures. There is no
sign of any panic in the market," said Tony Machacek of
Prudential Bache.

Energy Minister Purnomo Yusgiantoro said on Tuesday that an
Indonesian delegation will seek support from fellow OPEC member
Nigeria for a further output cut on a visit to Abuja next week.

"For Indonesia, OPEC needs to cut production during its
meeting in March. According to a study there will be a 1.5
million barrels per day drop in demand," Yusgiantoro said.

But Iranian Oil Minister Bijan Zanganeh has not committed to
new supply restraints, saying it was too early to predict whether
OPEC ministers would decide to cut output.

"If prices are stable, we don't need to act in March, it
depends on the market situation," he said on Tuesday during a
visit to Japan. Iran is OPEC's second largest producer.