Key Crude Price Spurts on Hopes of OPEC Action : Technical Factors Help Push Oil Past $19 a Barrel
Oil prices zoomed above $19 per barrel Wednesday as traders concluded that OPEC was finally facing up to the problem of its burgeoning production.
The rally was sparked by news that pricing and quota committees of the Organization of Petroleum Exporting Countries would meet Sept. 7, although it remained unclear what the committees can do. The market was also driven by technical factors, analysts said.
On the New York Mercantile Exchange, the price for West Texas Intermediate crude oil for October delivery surged by 82 cents to $19.46 per barrel. As recently as midday on Monday, the same oil barely fetched $18.
Prices for refined products also moved higher Wednesday.
Despite the short-term recovery, prices remain nearly $3 below the levels of a month ago. The decline was a reaction to reports that OPEC was pumping as much as 3 million barrels more than its quota of 16.6 million barrels per day.
‘Necessary Measures’
OPEC President Rilwanu Lukman of Nigeria has conceded that the cartel was producing above its quota and called a Sept. 7 meeting of a special committee formed to persuade members to honor their quotas. The committee includes Lukman and the oil ministers of Venezuela and Indonesia.
Lukman spoke out again Wednesday, saying the cartel “will put in motion all necessary measures . . . to achieve OPEC’s objective of maintaining market stability at $18 per barrel.” He did not elaborate on what OPEC would do.
Lukman was referring to the official OPEC fixed price, which averages about $18 per barrel for various grades of OPEC crude. Oil from the Middle East priced at $18 usually translates into a West Texas Intermediate price of about $19.50 a barrel.
Until the recent decline, the benchmark U.S. crude had soared to nearly $23 a barrel in apparent response to jitters over the military situation in the Persian Gulf, too high to suit OPEC pricing moderates.
Lukman indirectly admitted Wednesday that OPEC members had moved to take advantage of the higher spot prices, not by charging more than the official price but by boosting production to exploit the fact that the cartel’s oil was in greater demand because of its bargain price.
The special OPEC committee can only jawbone member nations to abide by the quotas and fixed prices established last December. Adherance to the quotas, spurred by fresh memories of the price collapse caused by 1985 overproduction, had raised prices from a trough of $10 a barrel last year.
