OPEC May Consider Cutting Back Crude Production

Oil prices settled above $60 a barrel Thursday on expectations that OPEC would soon cut its output, though a representative of Saudi Arabia denied there was a deal to reduce production.

Concerns also grew about the stability of world oil supplies amid violence in Nigeria and as the United Nations considers possible sanctions against Iran over its nuclear program.

The president of the Organization of the Petroleum Exporting Countries, Edmund Daukoru, did not clearly confirm or deny a slew of reports attributed to anonymous sources from member countries who said the cartel planned to trim its daily production by 1 million barrels.

However, a spokesman for Saudi Arabia’s U.S. ambassador said there was no plan in Riyadh to crimp supplies to prop up prices. “A decision hasn’t been made,” Nail al Jubeir said.

Oil prices initially jumped more than $1 a barrel amid the uncertainty, then eased back as traders said they doubted whether all OPEC members would go ahead with any informal agreement intended to stem a 24% decline in prices since mid-July.

Daukoru, who is also Nigeria’s oil minister, said the group was considering holding an emergency meeting before its scheduled Dec. 14 conference.

“We agree that something needs to be done,” Daukoru said, referring to possible cuts in output. “We will have to agree on how much, how soon and how we distribute it among the member countries.”

Daukoru said OPEC members would agree on a formal position on oil cuts only after consultations.

Dow Jones Newswires, citing an OPEC governor, said the cartel’s ministers had agreed to cut output by 1 million barrels a day, including 300,000 barrels a day from Saudi Arabia.

PFC Energy analyst David Kirsch said he was operating on the assumption that OPEC was already making gradual output reductions to tighten up global inventories that were rising because of slower economic growth and increased production from non-OPEC countries.

Light sweet crude for November delivery settled Thursday at $60.03 a barrel on the New York Mercantile Exchange, an increase of 62 cents. Oil prices climbed as high as $60.97.

Prices temporarily fell to a fresh seven-month low Wednesday after U.S. government data showed rising inventories of crude, gasoline and heating oil -- and after comments from Saudi Arabia’s ambassador to the U.S. that suggested that no formal OPEC cut was imminent.

But news late Wednesday of violence in Nigeria’s oil-rich southeastern delta brought buyers back into the market. Nigeria’s light, sweet crude oil is particularly desirable for the production of transportation fuels, and any loss of output has the potential to spook the market.

On Thursday, Britain’s ambassador to the United Nations said the U.N. Security Council would start discussing a resolution next week that would impose sanctions on Iran for refusing to suspend uranium enrichment. Many oil traders fear that Iran, OPEC’s No. 2 producer, could take oil off the market in retaliation to any sanctions.

In other Nymex trading, heating oil futures gained 1.5 cents to settle at $1.692 a gallon while gasoline futures rose 1.87 cents to settle at $1.5165 a gallon.

Natural gas futures rose 30.3 cents to settle at $6.298 per 1,000 cubic feet.