Oil Prices Rebound After 19-Month Lows

A worker changes the prices of gasoline in Monday. The government of Honduras temporarily took control of the storage tanks of Esso and Texaco to drive down oil prices. (Edgard Garrido - AP)

SINGAPORE -- Oil prices rebounded Wednesday after plunging to 19-month lows after Saudi Arabia's oil minister said further OPEC productions cuts were not necessary right now.

Light sweet crude futures for February delivery rose 36 cents to $51.57 in midmorning Asian electronic trading on the New York Mercantile Exchange. Its Tuesday settlement at $51.21 was the lowest since May 26, 2005.

February Brent crude on London's ICE futures exchange increased 40 cents to $52.02 a barrel.

Energy analyst Victor Shum, with Purvin & Gertz in Singapore, said that the 11-member Organization of Petroleum Exporting Countries first needed to follow through on reductions they have already announced.

"OPEC will need to stick to their previously announced plan of cuts to prevent prices from falling further," Shum said, projecting "a lot of volatility in the market."

OPEC has committed to a total cut in output of 1.7 million barrels per day, including a 500,000 barrel-a-day reduction set to begin Feb. 1.

But compliance is believed to be halfhearted. According to Dow Jones Newswires, independent surveys suggest OPEC has cut output by little more than half of its pledged levels. Production remains near 27 million barrels a day or about 700,000 barrels a day above OPEC's target.

Crude oil prices plunged Tuesday after Saudi Oil Minister Ali Naimi said it was unlikely OPEC would reduce output further.

"There is no need now (for further cuts) on the basis of what market conditions are," Dow Jones Newswires quoted Naimi as saying after he arrived in New Delhi for an international conference organized by India's Oil Ministry.

The comment followed a call on Monday by Venezuela's oil minister Rafael Ramirez for an emergency OPEC meeting to push for another cut.

"I do see the chance of prices strengthening again, as long as the global economy remains healthy," Shum said.

Crude oil has fallen more than 16 percent this year in a sell-off triggered by a historically warm winter in the northern United States and sustained by large funds taking short positions in the market, or bets that prices will fall.

In other Nymex trading, heating oil rose 0.82 cent to $1.4885 per gallon and natural gas futures were up 5.3 cents to $6.691 per 1,000 cubic feet.