UPI Energy Watch

Crude oil steadies

Oil hit a five-week high Tuesday, with global conflict raising it above $50 per barrel. Analysts said prices rose because of the fighting in Gaza, the Russian-Ukrainian conflict and the recent attacks on the oil industry in Nigeria.

Oil prices dropped slightly Wednesday and steadied right around $50 per barrel as the industry again felt the effects of the global economic downturn.

Some also said production cuts may have had some influence in driving prices, the Malaysia Star reported.

The price may continue to fluctuate as the fighting in the Gaza Strip goes on; analysts said there is fear the fighting could disrupt supply.

Also, the gas supply disruption in Ukraine and Europe is not likely to end soon, and that is also impacting the price of oil as those natural gas customers turn to oil for fuel and heating.

Pushing on the downward side of pricing is Iraq, which, despite cuts by the Organization of Petroleum Exporting Countries, announced it is going to increase its oil output by 50 percent by 2012.

Many analysts have said the key to stabilizing oil at a higher price is in the United States stabilizing its economy. No major economic changes are expected until later in 2009.

Santos gets a boost with new contract

Australia's latest contract will allow it to restart one of its offshore natural gas projects that was put on hold last month when no production-sharing agreements could be made.

Santos announced it signed a $585 million deal to supply natural gas to Chinese-owned CITIC Pacific's Sino iron ore development in Western Australia, Australia's Herald Sun reported.

The gas will be supplied beginning in the second half of 2011 from the Reindeer gas project. The gas field is a joint venture between Santos and Houston-based Apache Corp., with Santos holding 45 percent and Apache holding 55 percent.

The deal will require that the joint venture build a 105-kilometer offshore pipeline and onshore gas processing plant.

"We are pleased we were able to sign this new gas sales contract with CITIC Pacific," Santos Chief Executive David Knox said. "The Reindeer field and Devil Creek facility represent important steps in bringing a significant new source of gas supply into the rapidly growing West Australian market."

OPEC calls another meeting

The Organization of Petroleum Exporting Countries will hold another emergency meeting in February, said Mohammad Ali Khatibi, Iran's representative to the oil cartel.

Chinese news agency Xinhua reported the meeting will be held in Kuwait, though no date has been set. OPEC is expected to again discuss the continued downward trend of oil prices, despite the group's efforts to cut production and increase prices. The next meeting had been scheduled for March, Khatibi said.

"If we could have a meeting in February, we could evaluate OPEC's January performance," Khatibi said.

The cartel's goal was to cut output by 2.2 million barrels per day starting Jan. 1, or about 9 percent, and one by one, its member nations have begun complying following the last meeting in Algeria in December.

Iran said it will cut its crude oil output by 545,000 barrels a day on average in January. Kuwait also said it is ready to comply.

OPEC supplies about 40 percent of the global oil supply, and its members rely on their oil export revenues for their budgets.

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Closing oil prices, Jan. 7, 3 p.m., London

Brent Crude oil: $51.37

West Texas Intermediate crude oil: $50.02

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(e-mail: energy@upi.com)