• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Oil Prices Rise Above $62 a Barrel

Posted on: Thursday, 14 December 2006, 18:00 CST

By BRAD FOSS

WASHINGTON - Oil prices rose above $62 a barrel Thursday after OPEC decided to keep its output steady for now but pledged to cut production in February by half a million barrels a day.

"It is a bit of a surprise and you can see that with the prices going up today," said Ann-Louise Hittle, an analyst at Wood Mackenzie.

"OPEC might have been worried that they would lose credibility if they didn't make another cut" after talking about the possibility nonstop in the weeks preceding the meeting, she added. "It's a little bit more of an aggressive approach."

Light sweet crude for January delivery rose $1.14 to settle at $62.51 a barrel on the New York Mercantile Exchange. Brent crude for January, which expires at the close of trading Thursday, was up 90 cents at $62.23 a barrel.

The bump in oil, pushed up several large energy companies' stock prices. Shares of Exxon Mobil Corp. gained $1.37 to close at $78.73 on the New York Stock Exchange, where shares of Royal Dutch Shell PLC rose 34 cents to end at $71.22.

Meanwhile, shares of fuel-dependent airlines fell, though the drop may partly reflect profit taking after a steady runup that followed excitement about industry consolidation. Shares of American Airlines parent AMR Corp. fell 58 cents to finish at $32.07 on the NYSE, while those of JetBlue Airways Corp. slid 33 cents to settle at $13.82.

The delayed cuts by the Organization of Petroleum Exporting Countries, spurred by concerns of bulging worldwide inventories and anticipated non-OPEC supply growth in 2007, were meant as a warning shot to the world's major consuming nations.

"OPEC is making a very clear statement here that they intend to limit inventories, keep a floor under prices and aim for higher price levels," Citigroup analyst Tim Evans said in a research note.

Saudi oil minister Ali Naimi said the price of crude didn't figure in the decision: "What we're working towards is to rebalance the market and this decision does this," he said.

In its official statement, OPEC said it expects non-OPEC supplies to grow by 1.8 million barrels a day in 2007, the biggest one-year jump since 1984, and about 500,000 barrels per day more than anticipated global demand growth of 1.3 million barrels.

While analysts might quibble with OPEC's math, they agreed with the underlying logic of the cartel's move.

By delaying action until February, OPEC left itself a window to decide against a cut should demand spike due to a colder-than-expected winter or stronger-than-expected economy.

Nymex heating oil futures rose 4.45 cents to settle at $1.7765 a gallon, and gasoline futures climbed 4.76 cents to settle at $1.665 a gallon. Natural gas futures fell 11.8 cents to settle at $7.555 per 1,000 cubic feet.

---

Associated Press Writer Mazin Elfehaid in Vienna, Austria, contributed to this report.

Source: Associated Press/AP Online

More News in this Category