* Senate fails to reach compromise on U.S. auto bailout
* OPEC should make severe output cut, says president
* Russia says ready to work with OPEC on output cuts
By Jennifer Tan
SINGAPORE, Dec 12 (Reuters) - Oil losses deepened to over
$2 on Friday after a bailout plan for struggling U.S. auto
makers stalled, raising prospects of a worsening economic
slowdown in the world's largest oil consumer.
Senate negotiators failed late on Thursday to reach a
compromise deal to bail out the U.S. auto industry and avert
the threatened collapse of one or more car makers.
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By 0450 GMT, crude for January delivery was down $2.60 at
$45.38 a barrel, off a session low of $45.14.
London Brent crude was down $2.34 at $45.05.
"The failure of the auto bailout has broader implications
for the already very weak U.S. economy -- these underlying
concerns have not disappeared, and we expect oil prices to
remain choppy over the next week," said David Moore, commodity
strategist with Commonwealth Bank of Australia.
November U.S. producer price inflation and retail sales, as
well as a preliminary reading on December consumer confidence,
could add to the economic gloom, and further weaken the dollar
which edged down towards a 13-year low against the yen.
Crude has shed two-thirds of its value over the last five
months, down about $100 from a record peak of $147.27 scaled
last summer as the global financial crisis crimps consumer
demand for fuel.
"We've not placed the lows in oil yet -- the demand
deterioration theme is still very much alive. I think we could
go back to $40 levels as early as next week," said Jim
Ritterbusch, president of Ritterbusch & Associates.
But it has still rebounded over 11 percent this week and is
heading for its biggest weekly gain in four years, having
jumped by 10 percent on Thursday after the OPEC president
called for more "severe" supply cuts at next week's meeting.
Traders are closely watching OPEC for more signals on what
some analysts say could be a further 1-2 million barrels per
day (bpd) output cut at the group's Dec. 17 meeting.
Russia's President Dmitry Medvedev has also weighed in,
saying the country was ready to work with OPEC on possible oil
output cuts.
Japan's Nippon Oil said it expected OPEC to agree to cut
1.5-2.0 million bpd next week.
"Chances for a 2.5 mln bpd cut are possible, but that would
put increased criticism on OPEC amidst the economic slowdown,
so I think the likely cuts are up to 2 mln bpd," Kazuyoshi
Takayama, Nippon Oil's general manager, told reporters on
Friday.
Providing a positive note, the International Energy Agency
on Thursday predicted that world oil demand growth would
rebound in 2009 after shrinking this year for the first time
since 1983.
The IEA's view that demand will grow in 2009 contrasts with
that of the U.S. government's Energy Information
Administration, which this week forecast consumption would fall
by 450,000 barrels per day (bpd) next year.
(Additional reporting by Osamu Tsukimori in Tokyo; Editing by
Michael Urquhart)
(jennifer.tan@thomsonreuters.com; +65-6417 4679; Reuters
Messaging: jennifer.tan.reuters.com@reuters.net)
