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.

US rules out new economic package

Jobs are being lost in the service, business and manufacturing sectors

The United States government says it does not see an immediate need for new measures to stimulate the US economy despite a sharp rise in unemployment.

The latest figures show a rate of 6.1% – the highest since December 2003.

A White House spokeswoman said that while the figures were disappointing, the existing economic stimulus plan was having the impact intended.

A call for more action had been made by the Democratic Party presidential candidate, Barack Obama.

A higher-than-expected 84,000 jobs were lost last month, which together with the unemployment rate has added to concern about the US economy and its ability to stave off a recession.

In a further blow, the Labor Department revised upwards job loss figures for each of the past two months.

The Federal Reserve said earlier that economic activity remained “weak”.

A separate report by the Mortgage Bankers Association said that almost one in 10 US homeowners were behind with their mortgage payments or was in foreclosure procedures.

The 9.2% default rate between April and June was up from 8.8% in the previous quarter, and nearly double the rate one year ago.

‘Convincing evidence’

The number of jobs lost last month was significantly higher than the 75,000 forecast by economists.

All sectors of the economy were affected with manufacturing worst hit, shedding 61,000 jobs.

This is more convincing evidence that the economy is still in trouble Gary Thayer, Wachovia Securities

The labor market has worsened noticeably in recent months, reflected by the fact that it is now apparent that more jobs were lost in June and July than was previously thought.

Revised figures show that in June, 100,000 jobs were lost while in July 60,000 jobs disappeared. This was up from the 51,000 figure initially forecast for both months.

“It seems unemployment in the US really is accelerating,” said the BBC’s North America business correspondent, Greg Wood.

“There do not seem to be many sectors of the US economy which are hiring.”

‘Clearly deteriorating’

In the first eight months of 2008, 605,000 jobs have been lost.

Employers have now reduced their payrolls for eight straight months, with the dramatic downturn in the housing market and the credit crunch hurting all sectors of the economy.

“This is more convincing evidence that the economy is still in trouble,” said Gary Thayer, senior economist at Wachovia Securities.

“The economy is clearly deteriorating.”

Political focus

Both candidates in November’s Presidential election are under pressure to come up with concrete proposals to help the growing number of people out of work and families battling against rising living costs.

Although the US economy grew a robust 3.3% in the second quarter, businesses are struggling to cope with the high cost of raw materials and energy, fragile consumer confidence and weaker export markets.

The Federal Reserve, which meets to decide on interest rates next week, has warned that the US is facing the twin threats of weak growth and rising inflation.

The bleak employment picture means the Fed is unlikely to raise rates in the foreseeable future while further cuts seem equally unlikely against a background of rising inflation.

“The jobs number is weak again but we think this probably is not the time to panic,” said Steve Goldman, strategist at Weeden & Co.

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