Updated from 11:28 a.m. EDT
Oil futures broke above $61 Wednesday after crude supplies plunged unexpectedly last week and Iran said it would follow OPEC's lead and trim exports next month.
Iran will cut daily production by around 180,000 barrels per day as part of OPEC's larger move to reduce the group's exports by 1.2 million barrels,
reported. The move helped ameliorate traders' suspicions that OPEC members would not follow the group's decision so they could preserve their oil revenues.
Saudi Arabia was the first to agree to the reduction when it told its Asian refining customers last week that it will cut back exports by up to 8% in November. But several days passed before the United Arab Emirates broke the silence and agreed to a 100,000-barrel cut, leading many in the energy markets to believe only the kingdom would follow the cut.
The benchmark contract on the Nymex, light, sweet crude, soared $2.05 to $61.40 a barrel.It was the highest close for the front-month contract in nearly a month.
The rest of the energy sector perked up, with wholesale unleaded gasoline rising 5 cents to $1.59 a gallon. Heating oil was inched up 4 cents to $1.73 a gallon, and natural gas jumped 60 cents to $7.69 per million British thermal units.
Crude inventories plummeted by 3.3 million barrels last week as imports dipped, according to the Energy Department's weekly update. The drop surprised analysts polled by
, who had called for an increase of 2.87 million barrels.
Stockpiles of crude, which is processed into gasoline, heating oil and jet fuel, among other products, had climbed for the past three weeks. Supplies are a little more than 5% higher than at this time last year.
With fewer refiners online, supplies of gasoline plunged last week by 2.8 million barrels, outpacing analysts' projections of a 125,000-barrel drop. Gasoline inventories, however, are 4% above last year.
Distillates, including fuels like heating oil, fell by 1.4 million barrels and now stand nearly 9% higher than last year. Although refiners have not been making as much heating oil before the winter, there are plenty of supplies right now to cover any spikes in demand. Inventories of distillates are 14% higher than last year.
Refining capacity declined last week to 86.2%, down from 86.3% the previous week.
Traders will now be looking to the Energy Department's natural gas supply report due out Thursday. In a
poll of analysts, supplies were expected to climb by 28 billion cubic feet. They currently stand at 3.4 trillion cubic feet, or 11% above the five-year average.
On the political front, Iran may be able to boost oil prices again over its refusal to halt nuclear development activities. Tehran restarted uranium enrichment in February in defiance of a U.N. ban and is about to expand its program with a second batch of centrifuges. European and American diplomats are circulating a draft resolution calling for economic sanctions against Tehran.
In Nigeria, rebels have attacked oil installations in a bid to gain a share of the country's oil revenue. In the latest attacks, villagers stormed a
Royal Dutch Shell
oil platform, taking 60 workers hostage and shutting production by 12,000 per day,
reported. Nigerian crude output is down by about 480,000 barrels per day.
Exploration and refining companies were up 1.5% on the Amex Oil Index, led by
ConocoPhillips' earnings totaled $3.88 billion, or $2.31 a share, after items reduced its net by 37 cents. Conoco earned $3.80 billion, or $2.68 a share, for the same quarter in 2005. Revenue dipped 0.6% to $48.4 billion.
Shares of ConocoPhillips were climbing nearly 2.6% to $63.
will also report earnings this week.