oil $80 - article Oil Near Record, OPEC to Mull Output Hike2...

oil $80 - article Oil Near Record, OPEC to Mull Output Hike

2 hours, 22 minutes ago Business - Reuters


By Richard Valdmanis

NEW YORK (Reuters) - U.S. oil futures surged within striking distance of a new record on Thursday but ended off their peaks after OPEC (news - web sites)-member Nigeria said the cartel could raise production to rein in runaway prices.


Reuters Photo



U.S. light crude for April delivery settled up 52 cents to $53.57 a barrel after soaring as high as $55.20, just short of the New York Mercantile Exchange futures record $55.67 hit in late-October.


North Sea Brent crude rose 73 cents to $51.95 a barrel after hitting $53.00, the highest level in 17 years of trade on the International Petroleum Exchange.


Oil's rise has been driven by a fresh influx of both speculative and long-term fund money into commodities, where surging raw materials demand from China and solid growth in industrialized nations have stretched production capacity.


The dollar's sharp fall last week accelerated the inflow as rising energy markets offered a place for speculators to park their cash and OPEC producers were thought likely to pursue higher dollar-denominated prices to protect purchasing power.


"It's going to be extremely difficult for this market to break below $50 this year. The only thing that would do it is a major slowdown in demand from a recession," said Nauman Barakat of brokers Refco in New York.


Prices ended sharply off their peaks, however, after Nigeria's top oil official said on Thursday the main focus of OPEC oil producers' March 16 meeting in Iran (news - web sites) will be discussion on whether to raise supply in response to rising prices.


"The price has been very good. It is above $50 (per barrel) currently so we will be discussing whether we should increase production or not. That will be the main talking point," Edmund Daukoru, presidential advisor on petroleum, told Reuters.


"Of course it is good for OPEC to make a lot of revenue. To that extent, short-term it is good for OPEC, but we should also think about the long term," he said.


U.S. Energy Secretary Sam Bodman said on Thursday the Bush administration is urging OPEC to hold or raise oil production when it meets, but has limited sway with the cartel.


"The capability of any representative of this government to influence the members of OPEC is limited," Bodman told a Senate panel hearing. "I do not control what OPEC does."


GASOLINE SPIKE


Refinery problems in the massive U.S. oil market and worries over possible revisions to U.S. government gasoline inventory data helped gasoline futures spike to a record $1.545 a gallon in New York.


The U.S. Energy Information Administration said Thursday it is checking into the accuracy of record high gasoline inventories in the Gulf Coast region, adding that it is too early to say whether data will be revised.


Government figures show U.S. gasoline supplies at their highest levels since 1999, but fears of a possible downward correction have helped bolster prices.


The market becomes more sensitive to problems with gasoline supply in the world's largest energy consumer with the approach of spring, as dealers anticipate rising motor fuel demand for the summer vacation season.


"With demand expected to exceed year-ago levels, even minor supply disruptions could tip the balance toward tighter stocks," said Fimat bank USA in a report.





$80?

Members of the Organization of the Petroleum Exporting Countries now appear confident prices will trade in a $40-$50 range this year, emboldening dealers to test the cartel's tolerance for $50-plus prices.

Talk in OPEC of even higher prices could stir fresh speculative buying.

OPEC's acting Secretary-General said on Thursday that crude could spike as high as $80 a barrel during the next two years, should there be a major supply disruption.

"I can stress that the probability that the price of a barrel of crude rises to $80 in the near future is a low probability," said Adnan Shihab-Eldin in Kuwaiti newspaper al-Qabas. "However, I can't rule out the rise of a barrel of oil to $80 in the coming two years."