SYDNEY, Nov 15 (Reuters): Oil held onto Monday's gains in early Tuesday trading, but failed to build on the rally after the Organisation of Petroleum Exporting Countries (OPEC) oil cartel resisted calls to cut output in response to the recent price slide.
Analysts remain confident that OPEC eventually will move to defend the oil price by easing production levels, which remain at full throttle in the wake of the autumn hurricane season.
But most analysts concede that colder weather is needed before a renewed rally will gain momentum.
"There's no specific need to talk about cutbacks just yet, but if we retreat towards $55 again, then OPEC will be making noises about production policy changes," said David Thurtell, commodity strategist at the Commonwealth Bank of Australia in Sydney.
Warmer-than-average pre-winter conditions have given producers breathing space to replenish stockpiles battered by the effects of hurricanes Katrina and Rita, which knocked out platforms and refineries in the Gulf of Mexico area.
But with OPEC continuing to pump at its highest capacity in 25 years in response to the storms, and balmy conditions limiting demand levels, oil has now given up much of its hurricane rally and last week fell to its lowest point since July.
Elsewhere, Venezualan state oil company PDVSA has signed a deal with China National Petroleum Corporation (CNPC) to supply 160,000 bpd of heavy crude and fuel oil as Venezuela seeks to boost energy exports to the emerging Asian market.
Meanwhile, the price of oil on world markets has become 'more realistic' after a recent correction, OPEC's acting secretary general, Adnan Shihab-Eldin, said Monday.
"Prices which had sharply risen because of the hurricane in the United States have declined now; we think that these prices have become more realistic," Shihab-Eldin, speaking in Arabic, told reporters during a visit to Algiers.