Oil nears $60 on Saudi cut talk

Saudi oil minister discusses further production cuts at Dec. 14 OPEC meeting.

LONDON (Reuters) -- Oil rose one percent towards $60 a barrel on Monday after Saudi Arabia's oil minister said OPEC may cut output further when it meets on Dec. 14.

Surging gold also lifted oil as investment funds sought an alternative to the dollar, at a 20-month low against the euro.

U.S. crude rose to $59.86 by 4:21 a.m. ET, up 62 cents from the settlement Wednesday, the last day of trade in New York before the two-day Thanksgiving holiday.

London Brent crude gained seven cents to $60.10, adding to 68-cent gains on Friday.

Saudi Oil Minister Ali al-Naimi, OPEC's most influential voice, held out the prospect of a further output cut when the group meets next month in Abuja.
At an emergency meeting in Doha in October, OPEC agreed to remove 1.2 million barrels per day from oversupplied markets -- the first cut in two years. Since then, OPEC ministers have lined up in favor of a further reduction to underpin prices.

"We must look at the impact of the measures decided in Doha. If they are adequate, we will be satisfied, if they are not we will act again and the aim is to bring stability back to the market," Naimi told reporters.

Production cuts during peak winter demand would achieve OPEC's aim of drawing down high oil stocks, affecting not just the cost of oil but the price of the shares of major oil companies like BP (Charts), ExxonMobil (Charts), ConocoPhillips (down $0.20 to $64.29, Charts) and Royal Dutch Shell (Charts).
"The longer oil stays below $60 the more chance OPEC will cut," said Tony Nunan, a risk manager at Mitsubishi Corp.

The dollar hit a 20-month low against the euro and a three-month low against the yen on Monday, amid worries over a slowdown in U.S. economic growth.
Oil has been stuck in a two-month trading rut of $58-$62 a barrel, showing few signs of resuming a climb back toward a record high of $78.40 a barrel hit in mid-July.

But increased tension in the Middle East could turn sentiment more bullish.

"So far Iraqi exports haven't been affected, but if the unity government there falls apart it could be a mess," said Nunan.

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