Oil rises on Opec production curb

Mr Khelil said Opec would re-assess the situation at the end of the year

Oil prices have risen to $104 a barrel in Asian trade, reversing earlier losses, after OPEC agreed to return to its late 2007 production levels.

After talks in Vienna, Opec president Chakib Khelil said the measures to curb over-production amounted to a cut of 520,000 barrels a day within 40 days.

The October US light crude future was up about $1 to $104.20 a barrel after earlier tumbling to near $102.

Prices have sunk from a record of more than $147 a barrel seen in July.

On Tuesday Brent crude had dropped beneath $100 a barrel for the first time since April, and crude prices remain close to $100, below which Goldman Sachs said earlier this week could signal a global recession.

The fall from the record prices in July has helped the US dollar, which hit an 13-month high against the euro on Tuesday.

Supply question

The price has since fallen by nearly 30% as a global economic slowdown has reduced demand for oil.

Supply has also been increased in recent months by some Opec members – principally Saudi Arabia.

Meanwhile, Indonesia has suspended its membership of Opec.

Actions [to curb output] will be taken by members as soon as they can Chakib Khelil, Algerian oil minister

“The conference regretfully accepted the wish of Indonesia to suspend its full membership in the organisation and recorded its hope the country would be in a position to rejoin the organisation in the not too distant future,” Opec said in a statement.

After the late-night talks in Vienna, the group announced it had decided to “strictly” comply to the production ceilings agreed in September last year, which amount to 28.8m barrels a day excluding Indonesia and Iraq.

It linked the falling price of oil to slowing economic growth, a stronger US dollar, easing geo-political tensions and greater supply.

“All the foregoing indicates a shift in market sentiment causing downside risks to the global oil market outlook,” a statement said.

Output curbs

The effect of the measures will be a cut of about 520,000 barrels a day, according to Algerian Oil Minister Chakib Khelil, who chaired the meeting.

“Actions [to curb output] will be taken by members as soon as they can, that means in the next 40 days,” he said.

Opec members will re-assess the situation when the meet again at the end of the year.

The move is a compromise meant to avoid new turmoil in the oil markets, but it also reflects Opec’s attempts to stop the recent falls in global prices.

Global economy woes shake markets

Japanese shares felt the force of the economic uncertainty

Fears about a global economic slowdown, heightened by worsening US job figures, have continued to undermine stock markets around the world.

London’s FTSE 100 index lost 2.3% – taking its weekly decline to 7% – its biggest since July 2002.

Markets in Paris and Frankfurt fell by 2.5% as economy concerns spread.

On Wall Street the Dow Jones index clawed back early losses to edge higher despite figures showing the US economy shed 84,000 jobs last month.

But the benchmark US index still had its worst week since May.

Earlier, Japan’s main share index fell nearly 3% while markets in Hong Kong, China, Australia and India all slid 2%.

‘Ugly’ data

The US labor market figures – which showed the unemployment rate rising to 6.1% – were a further jolt to investors who have had to swallow a slew of poor economic data in recent days.

Economists had been expecting 75,000 jobs to be lost while the government also revised upwards.

“This was an ugly number that pretty much confirms that our economy continues to trend downward,” said Jack Ablin, chief investment officer of Harris Private Bank.

“This just knocks the legs out of any hope of seeing much economic improvement right now.”

‘Uncertainty’

Amid the uncertainty, few investors are willing to buy Masayuki Otani, Securities Japan

The FTSE 100 closed down 2.3% at 5,240.70 points. The last time it lost so much value in a week was more than six years ago in the wake of financial scandals such as Enron and WorldCom.

Markets in Paris and Frankfurt continued their recent downward trend, both the Cac-40 index and the Dax-30 dropping about 2.5%.

The Dow Jones index, which lost 3% on Thursday, rose 32.73 points, or 0.3% to 11,220.96, but still ended down 2.8% on the week.

“Given the fact we were down so much yesterday we’re seeing a bit of a reflex rally with investors wanting to take advantages of some of the bargains,” said Bucky Hellwig, senior vice president at Morgan Asset Management.

The Nasdaq index slipped 3.16 points, or 0.1% to 2,255.88, ending the week 4.7% lower.

Earlier Japan’s benchmark Nikkei index fell 361.54 points to 12,196.12 amid a widespread sell-off of shares in Asia.

The Hang Seng index fell more than 3% in Hong Kong while markets also fell sharply in China, Australia and India.

“Amid the uncertainty, few investors are willing to buy,” said Masayuki, Otani, chief market analyst at Securities Japan.

“Several bad things happened at once,” he added, explaining the fall.

Gloom

Worries about inflation have prevented central banks in Europe from cutting interest rates to help forestall a slowdown.

But analysts believe this could change soon with economic forecasts across Europe looking increasingly gloomy.

The European Central Bank cut its 2009 growth forecast from 1.5% to 1.2% on Thursday while the UK economy stalled in the second quarter.

In a separate development, the Russian rouble fell against the dollar a day after Russia’s central bank intervened to support the currency amid concerns about a flight of foreign capital after the conflict with Georgia.

The central bank sold up to $4bn in reserves, the Financial Times reported, after the rouble slipped to its lowest level since February 2007.

German shopper mood remains weak

German consumers are not in an optimistic mood

German consumer confidence has fallen to a fresh five-year low, as recession and high inflation fears continue to sour the mood among shoppers.

The news came from market research firm GFK, whose forward-looking consumer confidence index has dipped to 1.5 points for September from August’s 2.1.

Further gloom was offered by restated official data which confirmed that the economy contracted from April to June.

Germany’s economic output fell 0.5% quarter-on-quarter in the period.

If this contraction was to continue between July and September, then Germany would formally be in recession.

‘Depressed mood’

Fueled by high energy and food costs, German inflation is continuing at its highest level since 1993, hitting household spending.

German companies are further being hit by high raw material costs, and in addition to lower domestic consumer spending, concerns remain the impact of a global economic slowdown.

The high value of the euro has also been a problem over the past year, although the dollar has rallied in recent weeks, offering some respite to German exporters.

“In addition to the continued price hikes for energy and fast moving consumer goods, expectations of weaker economic development are depressing the consumer mood in particular,” said the GFK report.

GFK surveys around 2,000 consumers for its monthly consumer confidence guide.