U.S. Oil at 14-Month High, Tops $19 a Barrel
U.S. oil prices topped $19 a barrel today, the first time they have surpassed that level in 14 months as traders increasingly believe that OPEC will adhere to new production limits.
In morning trading, the February contract on the New York Mercantile Exchange rose to $19.02 a barrel, up 14 cents from Monday’s close. Prices last closed over $19 on Nov. 4, 1987.
The members of the Organization of Petroleum Exporting Countries were subject to new output limits of 18.5 million barrels daily beginning Jan. 1, as the cartel tried to end the high production that had sent world oil prices tumbling. In December the OPEC members produced an estimated 22.5 million barrels daily.
The pact, which replaced lower limits that were widely ignored, was agreed in late November. Since then, prices have risen nearly $4 a barrel.
But the surge above $19 seemed to make some traders nervous. Prices later retreated slightly and were hovering just under the key level in early afternoon trading, with the February contract at $18.98 a barrel.
“The market is backing off on light volume,” said one trader. “Traders are taking some profits.”
Stephen Platt, analyst at Dean Witter Reynolds, said the recent rally in prices made the market vulnerable to some profit-taking.
Among other grades of oil, North Sea Brent crude was up about 15 cents at $17.15 a barrel for February delivery.
Rising Demand Boosts Market
In addition to the signs of OPEC restraint, the market has also been buoyed by strong demand for oil products.
The government’s Energy Information Administration reported Monday that total products supplied in the four weeks ended Dec. 30 were up 4.9% from a year ago.
The brisk sales pace was expected to be carried through to the first quarter.
Petroleum products failed to share in the enthusiasm for crude, however. The February heating oil contract was down 0.41 of a cent at 52 3/4 cents a gallon, due to relatively warm temperatures in much of the Northeast.
Gasoline was also lower, with unleaded gas down 0.21 of a cent at 50 3/4 cents a gallon.