Crude oil futures prices surged above $14 a barrel Wednesday for the first time in two weeks amid growing speculation that OPEC may be moving toward an agreement to restrain its production.
Analysts said some late buying was triggered by a rumor, promptly denied at the State Department, that the U.S. Embassy in Saudi Arabia had been bombed.
The price for the November contract for West Texas Intermediate oil, the benchmark U.S. crude, climbed 56 cents to settle at $14.11 a barrel.
In other trading on the New York Mercantile Exchange, the November contract for wholesale unleaded gasoline rose 1.87 cents to settle at 42.66 cents a gallon, while home heating oil rose 1.76 cents to 40.84 cents a gallon.
The market has been volatile this week as crude oil prices bounced back from last week’s lows of under $12.30 a barrel.
Reports that several members of the Organization of Petroleum Exporting Countries have been producing well in excess of their quotas drove prices down to last week’s lows.
But prices have moved higher since then, and some traders say signs have emerged of a more conciliatory attitude among OPEC members.
“There is a growing perception that prices had gotten low enough to force OPEC to do something,” said Peter Beutel, assistant director of the energy group at Elders Futures Inc. in New York.
Some Traders Nervous
Earlier this week, Saudi Arabia, the world’s largest oil exporter, reaffirmed that it would stick to its production quota if other members of OPEC did.
Beutel said the approach of the Oct. 20 meeting of the OPEC price monitoring and long-term strategy committees was making some traders nervous about the risks of agreements they might have previously made to sell borrowed oil contracts in expectations prices would fall further.
As speculation about production restraint grows, Beutel said, some of those traders are buying contracts to square those positions before the committee meetings occur.
He said some traders also think that this weekend’s meeting of the Gulf Cooperation Council, which includes four nations who are members of OPEC, could provide the OPEC members a chance to “patch something together” that could be discussed at the OPEC price and strategy committee meetings.
Bob Baker, senior energy analyst for Prudential-Bache Securities, said prices also were supported by an American Petroleum Institute report issued after the close of trading on Tuesday that said crude oil and gasoline stocks fell last week. He said many analysts were expecting rises.
Nauman Barakat, vice president of energy investment at Prudential-Bache, said the embassy bombing rumor triggered a late price rise because it raised concerns that terrorists could disrupt the oil supply from the Mideast.