Oil Prices Jump as Kuwait Sees No Changes by OPEC

Surging oil prices hit 15-month highs just below $30 a barrel Monday as Kuwait said it did not expect the OPEC cartel to ease supply curbs despite falling U.S. stocks and fears of military conflict in Iraq.

Oil traders had expected OPEC ministers meeting in Japan next month to loosen tough production limits as crude prices are nearing pain levels for Western consumer nations and demand normally balloons in the last quarter of the year.

At the New York Mercantile Exchange, crude oil for September delivery rose 51 cents to $29.84 a barrel, its highest close since May 2001.

The day’s rally extended a rise of more than $2 last week that came on fears of a possible military strike by the United States against Iraq and on a steep slide in U.S. crude oil stockpiles to the lowest levels in 17 months.

The Organization of the Petroleum Exporting Countries has held official production levels at the lowest level for a decade this year, helping to push crude prices up almost 50% despite sluggish fuel demand in a downbeat economy.

Middle East-dominated OPEC, which controls two-thirds of world exports, meets on Sept. 19 to chart output policy for the fourth quarter.

Kuwait’s acting oil minister, Sheik Ahmed al Fahd al Sabah, said Monday that he did not expect the OPEC cartel to raise output unless the price of its basket of crudes went above $28 per barrel. OPEC’s export price stood at $26.58 on Friday.

Mike Rothman, oil analyst at investment bank Merrill Lynch, said he expected OPEC to sanction higher output levels.

“Our view is that prices are approaching levels making both producing and large consuming nations uncomfortable,” said Rothman. “We sense that the pieces are in place for OPEC to formally implement quota hikes sooner rather than later.”

Consumer governments, led by the White House, fear that prices above $30 for U.S. crude could hit growth and endanger the tentative global recovery. A White House spokesman said Monday that President Bush had no plans to tap into the nation’s emergency oil stockpile, despite the recent price spike.

“The reserves are meant for times of emergency,” White House press secretary Ari Fleischer said.

The United States, the world’s largest oil consumer, has called on OPEC to raise flows by 1 million barrels a day from October to avoid a price spike this winter.

OPEC is cautious about raising supply too soon and jeopardizing a three-year oil price boom that has generated windfall revenues to its governments.

Analysts expect strong gasoline demand to make another dent in U.S. crude stocks when the industry group American Petroleum Institute releases its inventory report today.

Analysts were divided on whether U.S. crude-oil inventories rose or fell last week, after the American Petroleum Institute reported the biggest decline in 14 months the week before, a Bloomberg survey showed.

Estimates from nine analysts in a Bloomberg survey ranged from a decline of 3.5 million barrels to an increase of 5 million. Supplies plunged 9.5 million barrels to 295.6 million the previous week.

The decline in inventories during the week ended Aug. 9 was the biggest since the week ended June 8, 2001, and pushed supplies to their lowest level since March 2001, the institute said last Tuesday. Supplies were 3.8% lower than a year earlier.