(CEP News) - Concerns over more production cuts from OPEC are helping to boost oil prices closer to $50 a barrel, a major resistance point for markets.

WTI crude hit session highs today at $48.80 and are holding modest gains trading around $47. According to some commodity strategists news that OPEC might announce more production cuts at their meeting on March 15 in Vienna.

There are expectations that the oil cartel could cut anywhere from 500,000 barrels a day to 1,000,000. Some strategists are skeptical that any cut in production will outweigh the weak future supply outlook.

Although strategists are expecting more production cuts, there is no guarantee. According a report in al-Hayat, Saudi Arabia wants to higher compliance with the existing target before discussing more cutbacks.

“There is no need to speak of a new production cut as it would be enough to enhance compliance with the previous decisions,” the Saudi-owned newspaper reported, quoting unnamed sources.

Rob Gigiel, a commodities trader at MF Global said it is hard to believe any proposed cuts from OPEC will have long term impacts on supply.

“I think people are forgetting just how much crude is out there right now,” he said. “They are forgetting about the weakening economy and how the U.S. consumer is entrenched.”

Prices are on the precipice said Gigiel because oil could move to $55 and just as easily fall back to $35 a barrel. He added right now it’s a question of just how much economic weakness commodity markets have priced in.

“The long term trend line has been broken and as long as prices stay above that line then there is a very good chance prices could move higher,” he said.

Win Thin, currency strategist from Brown Brothers Harriman said OPEC doesn’t have a lot of credibility with its production cuts. He added the any move from OPEC is not keeping up with the weakening global economy.

“Given the still-deteriorating economic backdrop, we think this current oil rally is overdone,” he said. NC

WTI Crude oil is up $1.42 to $46.94 while ICE crude oil is trading down $0.75 to $44.10.

Meanwhile, ICE RBOB gasoline futures are up $1.95 to $133.22 and Globex natural gas is unchanged at $1.26. Heating oil at the ICE is up $6.96 to $122.94.

In the mining sector, spot gold is trading down $27.51 to $911.85 USD. In Canadian dollars, gold is down $27.47 to C$1181.19. Silver contracts at the CBOT are down $0.41 to $12.94.

Bloomberg’s index for base metals is down 1.56 points to 113.65. Wheat futures at the CBOT are down $3.50 to $523.50.

All data taken at 2:22 p.m. EDT

By Neils Christensen, neilsc@economicnews.ca

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