Crude Oil Futures Jump Sharply as OPEC Holds Line on Production

Crude oil prices Friday scored their biggest gain in three months on expectations that key producers will leave output targets unchanged for the rest of the year--and that supplies will tighten again before long.

Organization of Petroleum Exporting Countries members Algeria, Venezuela and Libya have said an economic slowdown makes an output increase unnecessary. OPEC adjusts production rates to keep its crude oil index in a range of $22 to $28 a barrel. It stood at $24.22 Thursday.

Meanwhile, the U.S. Energy Information Administration said Friday that oil inventories in the industrialized world will slip below normal levels by the end of summer because of rising demand.

Crude oil futures for August delivery jumped $1.19, or 4.4%, to $28.21 a barrel on the New York Mercantile Exchange. It was the biggest one-day gain since April 10. Prices increased 7.5% for the week.

Gasoline futures prices also rose sharply Friday.

OPEC members Tuesday decided to leave production quotas unchanged this quarter.

“OPEC will do their best to protect the price of crude oil and make sure it doesn’t fall below $22,” said Tom Bentz, a broker at BNP Paribas Futures in New York. “If there is a drop in prices, we will hear further talk from members making it clear production will not rise and might be cut.”

Some OPEC delegates have cited the potential for renewed Iraqi sales as a reason for keeping rates where they are.

Iraq halted exports in early June to protest a proposed tightening of United Nations sanctions that have controlled the country’s trade since its 1990 invasion of Kuwait.

The U.N. Security Council backed away from that proposal this week, and Iraq’s ambassador to the U.N., Mohammed al-Douri, said his country will restore oil exports to their normal level of about 2 million barrels a day, the Associated Press reported.

Though oil prices have slumped in recent weeks as inventories have risen, demand normally starts to build this time of the year as refineries boost inventories of heating fuels for winter in the Northern Hemisphere.