The battle between US rescue plans and the recession is escalating, leaving oil prices directionless. Last week, the price of West Texas Intermediate crude rose more than $4 in the wake of the announcement by the US government of the plan to rescue Citigroup, the weaker US dollar, high expectations of the US government bailing out General Motors, and China's interest rate cut of 1.08 percentage points to 5.58% to boost economic growth.

However, any gain in the oil price was limited by worrying economic data, which included the US consumer spending shrinking in the third quarter by the steepest rate seen in 28 years; demand for durable goods decreasing twice as much as forecast; and China forecasting that GDP growth for the fourth quarter would slow to 8% from 9% in the third quarter due to declining exports and increasing unemployment. The market was quiet going into the US Thanksgiving holiday at the end of the week with WTI closing at $54.43 a barrel.

The outcome of Opec's meeting on the weekend in Cairo was also being keenly monitored. Opec ministers were not expected to debate cutting oil supply but simply to lay the groundwork for a decision on deeper cuts at the policy-setting meeting in mid-December in Algeria. It is expected that Opec will need to slash production by at least one million barrels per day to match declining demand.

In a hint of things to come, the Kuwaiti press on Saturday quoted King Abdullah of Saudi Arabia as saying that oil prices of $75 would be "fair".

Iran's oil minister also said non-Opec states needed to co-operate in stabilising oil prices rather than acting individually, while the Russian energy minister said production cuts along the same lines as Opec were being considered.

The US investment bank Merrill Lynch last week lowered its oil price forecast for 2009 from $90 to $50 per barrel and stated that global demand would contract by 400,000 barrels per day. However, the International Energy Agency remains optimistic that the global demand for oil will rebound in 2010-11.

In Southeast Asia, the price of gasoline increased by $5 to close at $44.96 a barrel due to low Singapore inventories and firm requirements from countries in the Arabian Gulf as well as Vietnam, Indonesia and Africa. However, traders are still concerned over Indonesia's gasoline imports for December dropping and Taiwan selling gasoline at lower prices.

Meanwhile, diesel shot up by $3 to $65.04, reflecting low Singapore middle-distillate stocks and arbitrage flows to Europe, while a refinery turnaround in Taiwan is expected to also result in reduced production.