Oil's Upward March Is Halted

The May contract falls $1.43 to $56.03 a barrel.
By Elinor Arbel ,

Updated from 1:03 p.m. EST

Crude oil's steady upward march was halted Tuesday as all of OPEC's recent noise about raising its production quotas apparently took hold.

The newly benchmarked May crude contract fell $1.43 to $56.03 a barrel. Nymex heating oil dropped to $1.546 a gallon, and gasoline prices fell to $1.575.

Oil futures eased earlier after

Bloomberg

reported that February crude imports fell about 1% from a year ago in China. The contract also seemed to respond to pledges from OPEC that the cartel might add another 500,000 barrels to its daily output -- on top of the 500,000-barrel hike announced last week.

According to

Reuters

, Saudi Oil Minister Ali al-Naimi said such a decision to add to output could come at any time. Another boost would raise the cartel's overall production quota to 28 million barrels a day.

OPEC's first 500,000-barrel increase is scheduled to take effect April 1.

John Selser, partner at the $330 million Maple Leaf Partners fund and a former integrated oil analyst, says he is "always skeptical" about what OPEC says and does. "High prices are definitely incentives for producers to bring it on but I doubt there is excess capacity now that hasn't been exploited already. Any increased production would come from new drilling and new investments and not from squeezing existing ones" Selser said.

The other event looming for oil traders is Wednesday's inventory report by the U.S. Energy Department. Economists expect the report to show a 2.1 million-barrel build in crude stocks and a 1.8 million-barrel decline in gasoline stocks, according to

Bloomberg

.

Stock price movement was mixed among the major producers.

ExxonMobil

(XOM) - Get Report

dropped 95 cents, or 1.53% to $61.20, while

ChevronTexaco

(CHX)

fell 61 cents, or 1.02% to $59.41;

ConocoPhillips

(COP) - Get Report

lost $1.19, or 1.09% to $107.91; and

BP

(BP) - Get Report

slid $1.09 cents, or 1.68%, to $63.73.

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