WASHINGTON – Oil prices rose Monday on assumptions that OPEC is plotting its first output cut in nearly two years. Forecasts calling for colder weather in the Midwest also helped to push energy futures higher, analysts said.
Following a late-summer freefall of almost 25 percent, oil prices have bounced around the $60 level in the past week. Traders must weigh rhetoric from some OPEC members calling for output cuts against denials by Saudi Arabia, the cartel's largest producer, that a deal to reduce production exists.
OPEC is not scheduled to meet until December. The last time OPEC trimmed its output — by 1 million barrels a day — was December 2004 when oil traded slightly above $40 a barrel.
Some analysts are skeptical that members of the Organization of Petroleum Exporting Countries will be willing to produce less right now, given that prices are still twice as high as they were three years ago.
Still, the uncertainty is enough to discourage aggressive selling near-term, analysts said.
"Talk is cheap, and if they can keep oil prices up without cutting production they can have their cake and eat it too," said oil analyst Fadel Gheit of Oppenheimer & Co. in New York.
Gheit said he does not expect OPEC to make any formal agreement on cutting output unless prices fall to $45 a barrel.
After peaking at $78.40 in mid-July, oil prices plummeted due to rising worldwide inventories and concerns about slower economic growth. The mild Atlantic hurricane season also contributed to the selloff, by dashing the fears of speculators who had essentially placed bets that there would be several strong storms and significant Gulf of Mexico supply disruptions.
Over the weekend, reports from news outlets including Algerie Presse Service quoted OPEC officials as saying the 11-member cartel would reduce output by about 1 million barrels per day to stem a 24 percent decline in prices since mid-July.
After climbing as high as $61.25 a barrel, light sweet crude for November delivery on the New York Mercantile Exchange settled Monday at $59.96, an increase of 20 cents.
In London, November Brent gained $1.31 to trade at $61.14 a barrel on the ICE Futures exchange.
BNP Paribas Commodity Futures broker Tom Bentz said a formal announcement by OPEC to cut output would not necessarily cause oil prices to surge.
"It's already expected," said Bentz.
Reports have said a majority of OPEC states back a voluntary reduction, and the deal could be ratified as early as mid-December at a meeting in the Nigerian capital of Abuja. But OPEC's president, as well as Saudi Arabia, have denied that there is any formal agreement.
The reports came about a week after OPEC members Nigeria and Venezuela voluntarily began reducing their oil production by a combined 170,000 barrels per day. Official figures released in August put total OPEC production at just under 30 million barrels a day, though the cartel's official output quota — which does not include Iraq — stands at 28 million barrels a day.
In other Nymex trading, heating oil futures gained 3.57 cents to settle at $1.7297 a gallon while gasoline futures rose less than a penny to settle at $1.4949 a gallon. Natural gas futures were virtually unchanged at $6.429 per 1,000 cubic feet.