Crude Oil Prices Hit Highest Level in 3 Months
Crude oil prices raced to a three-month high Monday on the New York Mercantile Exchange on news that OPEC’s expected production increase won’t happen for at least another week.
Just 10 weeks after OPEC raised oil production to tamp down fast-rising prices, the cost of crude is soaring well above $30 a barrel again.
With a new delay in the cartel’s much-anticipated decision on whether to open the taps wider, crude for July delivery rose $1.54 to $31.74 a barrel Monday.
The Organization of Petroleum Exporting Countries had been expected to increase supply by 500,000 barrels a day last week--a move ministers authorized at their last meeting if the average 20-day price of OPEC oil topped $28 a barrel, which occurred nearly a week ago.
Although the increase is still expected to happen, a top cartel official said Sunday it won’t be formally considered until the oil ministers meet June 21 in Vienna.
“We are going to look at that situation, vis-a-vis our decision in March, and see whether something needs to be done,” OPEC Secretary General Rilwanu Lukman was quoted as saying.
The extra week-plus is a lifetime for traders in a bull market, especially with no relief in sight for a supply crunch, and their uneasiness translated into a buying surge Monday.
“People are very sensitive about the inventory levels, and any kind of delay makes them more sensitive about prices this summer,” said William Byers, an analyst for Bear, Stearns & Co. in New York.
“From the time they pump it out of the ground in the Middle East and ship it, to the time it gets where it’s going--we’re talking sometime seriously distant. Any kind of delay slows down the process. And who knows, maybe they won’t do it even in a week,” he said.
The analyst suggested some OPEC members could resist another production increase.
Market watchers also are concerned that a 500,000-barrel increase would be quite small--less than a third of the 1.7 million barrels approved in March. With U.S. gasoline stockpiles squeezed by extra demand for reformulated gasoline, a cleaner-burning fuel needed to meet stricter environmental standards this summer, the likelihood of OPEC meeting the needs of American motorists for the vacation driving season remains slim.
As for other energy products, July heating oil rose 3.64 cents to 77.87 cents a gallon, July unleaded gasoline rose 2.58 cents to $1.0440 a gallon and July natural gas rose 5.2 cents to $4.212 per 1,000 cubic feet.
In London, July Brent crude rose $1.63 to $31.21 a barrel on the International Petroleum Exchange.
