Oil Prices End Volatile Week With 1% Boost

Oil prices were on the rise again Friday to cap a roller-coaster week in which consuming nations were first encouraged and then left in limbo in the wake of an announcement by Saudi Arabia that it plans to boost production.

Crude oil for August delivery rose 1% to $30.28 a barrel on the New York Mercantile Exchange on speculation that there could be a delay in the plan by Saudi Arabia, the world’s leading exporter, to boost output to reduce prices and preserve world economic growth.

Other members of the Organization of Petroleum Exporting Countries are now in agreement with the Saudis on the need to raise supply soon, a cartel official said, but details of the timing and size of any production increases won’t be known until ministers meet in the next several days to negotiate.

A Venezuelan official was more direct:

“I think the original proposal--that Saudi Arabia would unilaterally boost by 500,000 barrels a day--is withdrawn,” Bernardo Alvarez, Venezuela’s deputy energy minister, said in a television interview. “OPEC members should act together, and [cartel President Ali Rodriguez] will consider the proposals with Saudi Arabia’s king and oil minister” at a meeting Wednesday.

Saudi Arabia said Monday that it was prepared to act on its own and raise its daily output by about 6%, or 500,000 barrels, if prices don’t fall to $25 a barrel. That news initially sent oil falling 5% and gave hope to consumers stung by gasoline prices that recently peaked above $2 in parts of the Midwest and remain near $1.70 in California for a gallon of self-serve regular.

“We haven’t seen the Saudi oil yet,” said Phil Flynn, vice president and senior market analyst at Alaron Trading Corp. in Chicago. “I do expect more oil. The world needs it and the Saudis know it, but how much, when, and will it be enough?”

That brewing uncertainty was evident Friday, as near-term futures on Nymex fell as low as $29.48 early in the day, then jumped later to close at $30.28, up 29 cents. That’s down from $32.50 a week ago but up slightly from the month-earlier $30.20. Prices remain 53% higher than a year ago and almost triple their 12-year lows of December 1998.

“Members have all agreed something has to be done in the next few days” to reduce prices to $25 a barrel, the OPEC official said. That target is for the so-called basket price, an average of several crude oils monitored by the cartel, which fell to $28.92 on Thursday.

Key oil ministers will meet this weekend in Algiers to take part in a series of gatherings originally scheduled to plan an OPEC heads-of-state summit slated for Caracas, Venezuela, in September.

OPEC President Rodriguez, who is also Venezuela’s oil minister, Secretary-General Rilwanu Lukman and oil ministers from Algeria and Libya are scheduled to attend, the cartel official said.

Prices might still be headed lower Monday, as few traders doubt Saudi Arabia’s determination to end the rally. The increase “is not going to be unilateral, because all the other members are going to go along rather than be left in the dust,” said Nauman Barakat, vice president of global energy trading at ABN Amro Inc. in New York.

Only four or five of OPEC’s 11 members would produce the extra oil, he said, and talks to allocate the new barrels were underway.

OPEC supplies about 40% of current global oil consumption of 76 million barrels a day. The cartel and non-OPEC partners including Mexico and Norway have already increased output twice in three months, lifting restrictions on production that had been imposed to boost prices that had bottomed out near $10 a barrel.