Oil Up on OPEC Pledge

The cartel says it will meet its targeted production cuts, challenging the DOE's findings.
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Updated from 10:34 a.m. EST

Oil prices charged past $59 Wednesday after OPEC ministers said the group will uniformly decrease output this month and the government said fuel supplies dipped last week.

Light, sweet crude picked up 90 cents to close at $59.83 a barrel on Nymex. Oil futures shed $1.09 to settle at $58.93 on Tuesday after a U.S. government report said OPEC will not trim production as much as had been expected.

The cartel, which controls over a third of the world's oil, pledged last month to trim output by 1.2 million barrels this month, but thus far, those cuts have been questioned. The U.S. Energy Department said OPEC members will instead reduce output by 745,000 barrels per day in its short-term energy outlook Tuesday.

OPEC members, though, were quick to discount the report.

"All of OPEC is committed," Mohammed bin Dhaen al-Hamil, the United Arab Emirates' oil minister, told the

Associated Press

.

This week, OPEC president and Nigerian oil minister Edmund Daukoru dismissed speculation that the group has a floor, or minimum price, for oil. But analysts believe the cartel is aiming to push oil prices above $60. As recently as September, OPEC members were content with oil prices, but they then moved swiftly to trim production when prices sagged below $60.

Thus far, oil prices have been locked in a range of $57 to $61 as traders alternatively focus on high supply levels, weather, OPEC's moves and the possibility of sanctions against Iran. Traders don't believe oil prices will break out of that band, barring an event large enough to push prices one way or another.

Regardless what OPEC does, the move will have little immediate effect, because domestic fuel inventories are 1% to 11% above last year. In the Energy Department's supply report Wednesday, crude inventories climbed by 400,000 barrels to 334.7 million barrels and are now 4% higher than last year.

Lower import levels and production shaved supplies of distillates by 2.7 million barrels and gasoline by 600,000 barrels. A slight increase in heating oil stockpiles let some of the air out of the bullish case for higher heating oil prices. Distillates, which include fuels such as heating oil, diesel and jet fuel, are now 11% above last year, while gasoline stockpiles are 1% higher.

Refiners operated at lower rates last week at 88.1%, down from 88.9% the previous week.

The inventory drop helped boost prices of wholesale unleaded gasoline and heating oil by 3 cents to $1.56 a gallon and $1.71 a gallon.

Natural gas increased by 6 cents to $7.82 per million British thermal units. Stockpiles are currently 9% higher than last year and are expected to dip by 4 billion cubic feet in the U.S. Energy Department's weekly inventory report on Thursday, according to

Dow Jones

.

Energy shares were following crude higher, with drilling and refining companies posting a 1.5% increase on the Amex Oil Index.

Occidental Petroleum

(OXY) - Get Report

,

ConocoPhillips

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,

Sunoco

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and

Exxon Mobil

(XOM) - Get Report

were leading advancers, up by as much as 2.6%.