Oil Prices Climb on OPEC Worries

Crude oil futures rose above $42 a barrel Wednesday despite government data showing an increase in U.S. fuel supplies. Traders were focused on an upcoming OPEC meeting at which the group could trim output in response to falling prices.

Light sweet crude for January delivery was up 89 cents to $42.35 per barrel in morning trading on the New York Mercantile Exchange (search). In London, Brent for January delivery on the International Petroleum Exchange was down 34 cents at $37.93.

Heating oil on the Nymex was down less than a penny at $1.215 per gallon.

The rise in energy futures came as the Energy Department (search) reported that the nation's commercial inventory of crude oil increased last week by 600,000 barrels to 293.3 million barrels, or 5 percent higher than a year ago.

The agency said the supply of distillate fuel, which includes heating oil and diesel, grew by 1.4 million barrels to 119.3 million barrels. That still leaves distillate supplies 12 percent lower than a year ago.

Concerns about tight heating oil supplies ahead of winter have eased somewhat due to mild fall weather in the Northern Hemisphere.

With oil prices down sharply from their late October peak above $55 a barrel, the Organization of Petroleum Exporting Countries (search) meets in Cairo on Friday to outline its plans for the first quarter of 2005, and hawks like No. 2 producer Iran have managed to garner support from Venezuela, Libya and Qatar in its bid to slash production to stem the decline in prices.

But OPEC president Purnomo Yusgiantoro said Wednesday the production cut could occur only in the second quarter of 2005.

"There is a possibility for the group to cut the output in the second quarter of next year, if prices fall," he told reporters in Jakarta.

OPEC members, including Iraq, are pumping out crude at full tilt at a record 30 million barrels daily — 3 million barrels above its official quota.

"While much attention is focused on possible production cuts ... the key to the near-term supply picture lies largely with one member — OPEC kingpin Saudi Arabia," Energyintel's Tom Wallin said in a research note.

The world's largest crude producer has yet to make its position known, but has traditionally been a moderating influence.

Elsewhere, Moscow slapped yet another bill on embattled Russian oil giant OAO Yukos (search), raising its back taxes to more than $25 billion for the near-bankrupt company and its subsidiaries.

In Nigeria, hundreds of protesters ended their three-day siege of the Royal Dutch/Shell Group of Cos. and ChevronTexaco oil platforms, agreeing to talks.

Petroleum prices have been high due to strong global demand, a tight supply cushion and fears of output disruptions in Iraq, Nigeria and Russia. In September, Hurricane Ivan knocked out significant oil production in the Gulf of Mexico, though output is now recovering.