Oil prices rise as Opec cuts take effect

22 January 2009

Opec supply cuts began to take effect on Wednesday with prices climbing by 6.6 per cent.

The market has faltered recently as falling demand brought about by the global economic crisis continues to take its toll.

US oil inventories have increased over the last few weeks, with prices continuing to slide despite the conflict in Gaza and the gas dispute between Russia and Ukraine.

While demand is expected to continue falling into 2009, experts said that Opec's biggest ever supply cuts are bound to have an impact.

Tim Evans, energy analyst for Citi Futures Perspective, told Reuters: "At some point, the Opec production cuts are going to rebalance the market."

Wednesday's price hikes saw US crude climb $2.71 to $43.55 (£31.43) a barrel, while London Brent settled at $45.02 after a rise of $1.40.

This follows a rise of six per cent on Tuesday when the February futures contract came to an end and could prompt some to purchase their home heating oil now before prices increase any further.

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