Updated from 12:46 p.m. EST
Crude oil prices continued to soar to new highs Tuesday, topping $34 a barrel, despite the continuing efforts of U.S. Energy Secretary Bill Richardson to meet with members of the
Organization of Petroleum Exporting Countries
to push for an increase in oil production.
April crude oil futures surged $1.95, or 5%, to settle at $34.13 a barrel after reaching an intraday high of $34.20 on the
New York Mercantile Exchange
. This is the highest level since Nov. 26, 1990, when crude hit $34.25 a barrel after Iraq invaded Kuwait.
Gasoline closed up 3.66 cents, or 4%, at $1.0191 a gallon, after reaching a high of $1.025 during the day, the highest level since September 1990.
"I think what the market is pricing in here is no OPEC increase or only a very small increase of something along the lines of one million barrels a day," said Tim Evans, senior energy analyst at
Pegasus Econometric Group
. "That would be a band-aid for a market that needs a tourniquet."
Oil traders are now looking to a meeting between OPEC hard-liner Iran and the more moderate Saudi Arabia. That meeting is scheduled to take place in Riyadh, Saudi Arabia, on Wednesday. A similar meeting in 1998 secured a decision to reduce production and jumpstart the sagging oil market.
Meanwhile, Richardson is continuing to apply diplomatic pressure in the hopes of getting a commitment for increased supply from OPEC member nations. Just back from 10 days of meetings, Richardson was in Miami on Tuesday morning for a meeting with Venezuela's oil minister and was scheduled to meet later in the day in Washington with the crown prince and oil minister of Qatar, a small Persian Gulf oil producer.
"He said last Friday he plans to talk with several of the oil ministers this week," said Jane Brady, an
Brady said Richardson was not making specific demands regarding how much more oil he would like to see produced. "All he's doing is encouraging an increase in production," she said.
But Michael Young, an oil analyst at Deutsche Banc Alex. Brown, said that even if Richardson's efforts succeeded and Iran and Saudi Arabia demonstrated some intention to lift production, the market would remain bullish.
"No matter what OPEC does, it's not enough in terms of bringing enough supply into the market," Young said. "It's difficult to see how that can be rectified in the year 2000."
While Saudi Arabia, Venezuela and non-OPEC member Mexico have indicated that they would support a jump in production, most market watchers do not expect them to agree to a big enough increase to offset high oil prices. They will also face pressure from such OPEC price hawks as Iran, Libya and Algeria.
Those countries issued a joint statement Monday saying they did not believe production needed to be raised in the second quarter because demand normally tapers off during this period. OPEC is scheduled to meet in Vienna on March 27.
Young said he expected oil prices to continue rising, adding that they could reach as high as $40 a barrel in the summer. Oil prices have so far tripled since December 1998.
High oil prices are seen contributing to U.S. inflation and could hurt growth both here and abroad.