Oil jumps on OPEC cuts
After closing at a four-year low of about $40 per barrel Friday, oil prices increased Monday on new word from the Organization of Petroleum Exporting Countries regarding planned production cuts, BBC News reported.
OPEC is likely to further cut production at its Dec. 17 meeting in Algeria, OPEC President Chakib Khelil said Saturday.
No one in OPEC has mentioned how large the cuts will be, but it is estimated that member countries could be asked to cut an additional 2 million barrels per day.
"The possibility of OPEC moving to tighten up the oil market is real," said David Moore at Commonwealth Bank of Australia.
Despite the increase, some analysts still think oil is headed lower. Merrill Lynch has said oil prices could drop to $25 per barrel if China's economy is severely impacted by recession.
Khelil went so far in his statement Saturday as to say the oil markets should prepare themselves for the upcoming decision on output quotas.
If OPEC's planned production cuts go into effect and oil prices do increase, that would mean the end of the recent decline in the prices of petroleum products as well.
Leaders of OPEC member nations have said the price of oil currently does not support their budgets, and if it were to drop below production costs, they would be forced to cut more than production.
OPEC had talked about making cuts at the end of November, but members wanted to wait until they had all implemented the first round of cuts.
China plans oil price reform
The Chinese government is currently seeking public comment on its plan to reform the country's fuel tax and pricing.
A draft of the proposal was released Saturday and public comment will be accepted until Dec. 12. Officials said the new tax and pricing could go into effect as early as Jan. 1, Chinese news agency Xinhua reported.
Under the proposal, six fees currently charged for road or waterway maintenance and management will be abolished, but drivers will pay higher fuel consumption taxes.
Gasoline taxes will be increased from about 3 cents per liter to 15 cents, and diesel taxes will rise from about 1 cent per liter to about 12 cents.
The tax is reflected in the pump prices and isn't an additional increase to the retail prices, the National Development and Reform Commission, Ministry of Finance, Ministry of Transport and State Administration of Taxation said in a joint statement.
There will be a ceiling on pump prices, and the government will continue to regulate domestic pump prices to shield itself from large fluctuations in international oil prices.
The government also will increase subsidies to farmers, taxi drivers and sectors of fishing, forestry and public transport, the statement said.
CNPC eyes Santos
According to an article in the South China Morning Post, China National Petroleum Corp. is considering making a takeover bid for Australia's oil and gas production company, Santos.
Santos, however, said the idea of a possible takeover is "pure speculation," the Sydney Morning Herald reported.
Stocks in Santos increased as much as 16 percent after the story broke.
"Santos is aware of continued speculation in the media regarding possible third party initiatives regarding Santos, including an article in this morning's South China Morning Post," it said in a statement to the stock exchange. "So far as Santos is aware, this is pure speculation."
Closing oil prices, Dec. 8, 3 p.m., London
Brent Crude oil: $41.25
West Texas Intermediate crude oil: $42.77