* Saudi Arabia to deepen output cuts in February
* Iran says OPEC could cut output again in March
* Russia-Ukraine deal on gas for Europe in doubt
By Fayen Wong
PERTH, Jan 12 (Reuters) - Oil fell towards $40 a barrel on
Monday, extending the previous session's 2 percent decline as a
big increase in U.S. unemployment renewed worries about energy
demand in the world's largest consumer.
The decline came despite news that OPEC kingpin Saudi
Arabia plans to cut oil output to below its agreed OPEC target,
ongoing supply disruptions in Europe from the Russia-Ukraine
gas dispute and tensions in the Middle East.
U.S. light crude for February delivery <CLc1> fell 32 cents
to $40.51 by 0133 GMT, having earlier touched as low as $40.15.
The contract settled down 87 cents at $40.83 on Friday,
after a U.S. government report showed employers slashed jobs by
524,000 in December, driving the national unemployment rate to
its highest level in almost 16 years. []
"The market is also keeping an eye on other developments in
OPEC, Europe and tensions in the Middle East, but the
consumption worry is still a big bear," said David Moore, a
commodities strategist at the Commonwealth Bank of Australia.
Oil prices fell 54 percent last year and have shed more
than $100 from a record peak of above $147 a barrel last July
as the global economic downturn hits demand for fuel.
The world's top oil exporter, Saudi Arabia, plans to cut
output by up to 300,000 barrels per day (bpd) below its agreed
OPEC target, a proactive step to prop up a collapsing market,
industry sources said on Sunday. []
The OPEC kingpin has already lowered supply this month to 8
million bpd, meeting its target under OPEC's pact to reduce
overall supplies by a record amount from Jan. 1.
Saudi Arabia's cutbacks add to similar moves earlier this
month by other OPEC producers including Iran, the United Arab
Emirates, Kuwait and Libya to curb supplies, although evidence
that oil producers were cutting output has not lent much
support to prices so far.
But Iran's representative to OPEC was quoted as saying that
the cartel could decide to reduce oil output again at its
meeting in March if crude prices fall further. []
Separately, a deal to restore Russian gas supplies via
Ukraine to Europe appeared on the verge of collapse after
Moscow rejected additions by Kiev as a 'mockery of common
sense'. []
And in the Middle East, Israel leaders trying to find a
knockout blow for Hamas militants defying a 17-day-old assault
have thrown army reservists into the battle. []
Although the Russian-Ukrainian gas price row and Middle
East tensions could help push oil prices higher, analysts said
any rebound was expected to be short lived.
"We believe that the upside drivers that drove prices from
a low of $33 per barrel to a high of over $50/bbl in the past
few weeks were mostly perceived or transient and do not create
the foundation for a sustainable recovery in prices," Goldman
Sachs Commodities said in a research note on Friday.
Goldman Sachs added that ongoing market surplus is expected
to continue to drive inventories higher and put pressure on its
forecast oil price of $30 a barrel for the first quarter of
2009.
Crude oil speculators on the New York Mercantile Exchange
increased net long positions in the week ended Jan. 6 in a bet
prices would rise, according to data from the U.S. Commodity
Futures Trading Commission released on Friday.
(Reporting by Fayen Wong; Editing by Michael Urquhart)
