Oil prices began the new year Monday by surging higher after an OPEC oil minister was quoted as saying members of the oil cartel have been adhering to production levels agreed upon last month.
On the New York Mercantile Exchange, contracts for February delivery of West Texas Intermediate, the U.S. benchmark crude oil, settled at $17.69 per 42-gallon barrel, up 99 cents from Thursday's close. The market was closed Friday for New Year's Day.
Futures prices for refined oil products traded on the exchange also rose.
Wholesale heating oil for February delivery jumped 2.77 cents to close at 52.76 cents a gallon, while wholesale unleaded gasoline for February delivery climbed 2.29 cents to 46.11 cents a gallon.
Peter Beutel, assistant director of the energy group at Elders Futures Inc., said the market started off higher following the statement by the oil minister of the United Arab Emirates.
Mana Saeed Oteiba was quoted by his country's state-run newspaper, Al-Ittihad, as saying oil prices would rise within a few days to the $18 benchmark set by OPEC ministers because the cartel's members have adhered to its production ceilings and pricing guidelines.
During their December meeting in Vienna, the ministers of the 13-nation Organization of Petroleum Exporting Countries agreed to maintain an official price of $18 a barrel and a system of production controls based on a collective ceiling of 15.06 million barrels a day.
"While I don't think many people are believing" Oteiba's statement, Beutel said, the minister's comments nevertheless gave the oil market a firm undertone.
Andrew Lebow, a trader with Shearson Lehman Bros., agreed that conjecture about OPEC production boosted oil prices Monday. "There was no concrete news (Monday) that would warrant the market being up a dollar," he said.
Beutel said the market was beginning the new year with a better attitude.
"It shows what a difference a year makes, even if it's only a few days," he said.
However, he cautioned: "I'm not sure what fundamentals could sustain this kind of strength."
"I don't see anything to sustain this kind of movement upward, at least for the first quarter," he said.
Icy temperatures and snowy weather across the country added to the demand for heating oil and boosted energy futures prices in general Monday. Lebow said supplies of heating oil distillates were "tightening up."
Technical factors also contributed to the rally, the analysts said.