NEW YORK – Oil rose sharply on Monday after Venezuela said swelling global inventories justify an OPEC cut at the group's meeting next week and the U.S. government predicted another busy hurricane season that could threaten rigs and refineries.
The bounce in crude prices came after a steep sell-off across the commodities sector over the past week that had oil at a six-week low earlier in the day.
U.S. crude settled up 70 cents at $69.23 a barrel, recovering some ground after touching its lowest since April 10 at $67.42. London Brent crude was up 67 cents at $69.35.
Venezuelan Oil Minister Rafael Ramirez said Monday that the oil market had enough supply to justify a production cut by the OPEC cartel. The group meets in Caracas June 1.
"Effectively, market fundamentals would indicate a production cut, because there is a lot of oil in the market," Ramirez told reporters.
Venezuela has consistently supported a hawkish OPEC policy, despite soaring energy prices. Other OPEC members have said the group is likely to keep output levels unchanged at near-full capacity as crude prices remain close to the record.
Actual OPEC production has been reduced in recent months by militant unrest in Nigeria, with attacks taking out one quarter of that nation's exports.
Adding support Monday, the U.S. National Oceanic and Atmospheric Administration said 2006 could bring up to 10 hurricanes, a potential threat to U.S. energy infrastructure still recovering from last year's storms.
Last year's hurricanes temporarily knocked out a quarter of U.S. crude and fuel production, toppling offshore platforms, destroying undersea pipelines, flooding coastal refineries, and sending energy prices over $70 for the first time.
About 20 percent of the Gulf of Mexico's 1.5 million bpd of crude oil production remained shut from the record 2005 storm season, along with 13 percent of the region's 10 bcfd natural gas production, according to the government.
"Each hurricane we get is another roll of the dice on U.S. energy infrastructure," said Peter Beutel, energy analyst at Cameron Hanover.
DEMAND WORRIES LINGER
Oil prices slid nearly 5 percent last week after signs that the record price of many raw materials was pushing up the cost of living and hitting consumers' pockets.
Rising inflation may force central banks to target higher interest rates, in turn slowing growth and cutting demand for commodities, a factor some experts said could leave oil room for a further correction downward.
"Oil prices have suffered a hangover with the fall in other commodities," said David Thurtell, commodities strategist at the Commonwealth Bank in Sydney. "They were too far out of line with fundamentals and could still have further to fall."
Recent weakness in oil prices has also been encouraged by rising supplies of gasoline in the United States ahead of the summer vacation season, when demand usually peaks.
U.S. government data last week showed domestic motor fuel stocks rose for the third consecutive week.
Gasoline inventories probably rose again last week as refiners boosted production in preparation for the uptick in demand, according to a survey of analysts.