Market watch: Oil prices rise in anticipation of OPEC action

Futures prices for oil and refined products jumped Wednesday in anticipation that members of the Organization of Petroleum Exporting Countries will roll back production quotas by 1.5 million b/d at their meeting Friday in Cairo. Lower temperatures in the eastern US and forecasts of even colder weather also helped boost energy prices.

By the OGJ Online Staff

HOUSTON, Dec. 27 -- Futures prices for oil and refined products jumped Wednesday in anticipation that members of the Organization of Petroleum Exporting Countries will roll back production quotas by 1.5 million b/d at their meeting Friday in Cairo.

Lower temperatures in the eastern US and forecasts of even colder weather also helped boost energy prices, analysts reported.

The February contract for benchmark US sweet, light crudes shot up $1.65 to $21.27/bbl on the New York Mercantile Exchange, while the March position increased $1.63 to $21.45/bbl Wednesday. However, in after-hours electronic trading, the February contract dipped 2¢ to $21.25/bbl while the March contract was unchanged.

Home heating oil for January delivery jumped 4.62¢ to 59.46¢/gal, while unleaded gasoline for the same month rose 4.27¢ to 60.13¢/gal. The January natural gas contract inched up 1.6¢ to $2.91/Mcf on the NYMEX.

Crude futures prices also surged early Thursday on the Tokyo Commodity Exchange in strong support for the upcoming OPEC meeting. Dubai crude shot up $1.31 to $19.32/bbl on that exchange, although Oman blend dropped 16¢ to $18.01/bbl.

In London, North Sea Brent oil futures were reported "comfortably above $20/bbl" in early trading Thursday on the International Petroleum Exchange.

The IPE was closed Wednesday. However, on Monday the February contract for North Sea Brent oil was down 2¢ to $19.34/bbl, while the January natural gas contract plunged 10¢ to $3.98/Mcf.

On his arrival in Cairo Wednesday, Saudi Arabian Minister of Petroleum and Mineral Resources Ali I. Naimi made remarks interpreted by some as virtually guaranteeing that OPEC would roll back its production quotas the full 1.5 million b/d starting in January, although non-OPEC producers are still short of their demanded cut of 500,000 b/d.

Russia, Norway, Mexico, Oman, and Angola so far have pledged to reduce oil production and exports by 462,500 b/d.

"We will be able to decide," Naimi said. However, he added, "The decision will not be an easy one."

The average price for OPEC's basket of seven crudes jumped by 40¢ to $18.18/bbl Wednesday.

For all of last week, however, that basket price averaged $17.57/bbl, up from $16.84/bbl the previous week. So far this year, the basket price for OPEC has averaged $23.23/bbl, compared to an average price of $27.60/bbl for all of 2000.

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