OPEC Plans, Hurricane Send Oil Prices Higher
Hurricane Gilbert had almost as much influence in sending oil prices soaring Wednesday as did news that OPEC would hold a special meeting to find a way to boost the sagging world market.
The rally that began late Monday has pushed futures prices up about $1.65 a barrel since briefly touching a two-year low.
The price boost was fueled partly by concern that a hurricane approaching the Gulf of Mexico coast would disrupt gasoline output at refineries along the Texas-Louisiana border as well as offshore oil production.
But the overriding element driving the market involved OPEC-related developments, including an announced meeting of the cartel’s price monitoring committee later this month that signaled a possible cutback in world oil production.
On the New York Mercantile Exchange, the contract for October delivery of West Texas Intermediate, the benchmark grade of U.S. crude, soared 84 cents a barrel to close at $15.40. Trading volume reached 160,363 contracts, the highest since a record 175,383 contracts were traded last Dec. 17.
That is up sharply from Monday, when crude prices plunged briefly to a nearly two-year low of $13.75 before rebounding to settle at $14.49. Wednesday’s prices ranged between $15.05 and $15.46.
Wholesale unleaded gasoline for October delivery zoomed 3.21 cents a gallon Wednesday to settle at 47.02 cents. The October wholesale heating oil contract rose 2.24 cents a gallon to settle at 44.07 cents.
“What’s motivating this is . . . optimism that the OPEC price committee is going to meet,” said Bob Baker, an analyst with Prudential-Bache Securities Inc.
OPEC Secretary-General Subroto announced that the cartel’s price monitoring committee would meet Sept. 25-26.
Although members of the committee, which is comprised of Saudi Arabia, Venezuela, Algeria, Indonesia and Nigeria, cannot take pricing or production action, it can call a meeting of the entire 13-member Organization of Petroleum Exporting Countries.
The prospect of such a meeting was enough to move the market, although most traders remained cautious.
“It indicates that OPEC is going to take some action,” said Andrew Lebow, senior broker and analyst with ED&F; Man International Futures Inc. “But we don’t know if this rally is real. OPEC may do nothing and the market may come off. We have probably seen the low prices-- for this week anyway.”
Reports Wednesday also indicated that some members of OPEC had reduced their output. The market had turned bearish last week on reports that OPEC was producing 20 million barrels of oil a day, or more than 1 million barrels above the level the market could absorb. Wednesday’s reports indicated that OPEC production was down to about 18.5 million barrels, said Peter Beutel, assistant director of Elders Futures Inc.
