Crude Oil Hits New Nine-Year High

Updated from 1:25 p.m. EST

Crude oil prices surged to a new nine-year high on Wednesday after a report, later denied, that the Organization of Petroleum Exporting Countries would raise production by 1.2 million barrels per day starting April 1.

April crude oil futures closed up $1.34 cents, or 4%, at $31.77 a barrrel at midday, the highest level since the Persian Gulf War, when crude hit $32.75.

The news report "gave us a now-you-see-it, now-you-don't look at one possible scenario for an increase in production," said Tim Evans, senior energy analyst at Pegasus Econometric Group. "But the market still felt that 1.2 million barrels wasn't enough."

Higher gasoline futures prices, which rose on the heels of reports of a drop in inventories and a refinery fire at a BP Amoco refinery in Indiana, also contributed to the rise in crude prices.

Evans said he was currently waiting for signals from London, where oil ministers from cartel member nations Saudi Arabia and Venezuela and non-OPEC Mexico were scheduled to meet on Thursday. Earlier on Wednesday, Reuters reported that these countries would propose raising OPEC's supply in April.

Venezuela later denied the report.

Aware that higher oil prices would push clients such as the U.S., to seek oil supplies from non-OPEC sources, some OPEC members have, however, signaled that they favor working to bring prices back into the optimal range of $25-$30 per barrel.

But Evans said he did not think any decisions would be made before OPEC's March 27 meeting in Vienna.

"There's no indication there is a consensus within OPEC," he said. "Consensus will only be arrived at over strudel at the face-to-face meeting in Vienna."

Saudi Arabia, Venezuela and Kuwait are thought to be more amenable to loosening the reins on supply, while Iran, Libya and Algeria are seen opposing production increases.

Market watchers said it was difficult to forecast the next resistance level for crude oil prices due the current climate of uncertainty.

"This market has reached a point where no specific price level means anything," Evans said. "If prices are 10 cents higher, does that mean that the market is more bullish than now?"