Crude oil prices rise, but were tempered by producer comments

Bennie M. Currie

Associated Press Writer

Crude oil prices were higher while other energy futures were mixed May 12 on the New York Mercantile Exchange as the market reacted to word from Mexico and Venezuela that OPEC and its allies were prepared to maintain market stability.

Luis Tellez, Mexico’s energy minister, and a Venezuelan energy official both issued guarantees that OPEC would boost oil supplies to stave of higher prices. Mexico, one of the leading oil producers not in the Organization of Petroleum Exporting Countries, would support a move to keep prices down, according to Tellez.

OPEC currently is producing 26.6 million barrels of crude daily. That’s about 1 million barrels above its 25.6 million barrel target set last March when OPEC members voted for an output hike of about 1.7 million barrels a day to bring down international oil prices that had reached 10-year-highs.

The cartel plans to review market conditions next month, a move that could open the door to further production increases. On May 12, Tellez indicated confidence in OPEC’s previous statements that it will try to keep the price of oil between $22 to $28 a barrel.

“The statement by Tellez obviously was meant to ease concern that OPEC is prepared to act again if prices go up,” said Phil Flynn, the vice president and energy analyst for Alarton Trading Corp. in Chicago. But this is an untested policy. The market is retreating, saying ‘Show me if it can work.’ “

As a result, light sweet crude for June delivery settled 51 cents higher at $29.62 a barrel after rising as high as $30.00 a barrel in trading earlier May 12.

In trading on other energy commodities, June heating oil fell 0.48 cent to 76.83 cents a gallon; June unleaded gasoline rose 0.40 cent to 94.04 cents a gallon; June natural gas rose 0.02 cents to $3.354 per 1,000 feet.

In London, June Brent crude from the North Sea rose 60 cents to $28.05 a barrel on the International Petroleum Exchange.

Analysts said it remains to be seen whether OPECs pricing strategy will ward off renewed pressures from the United States to step up production to reduce gasoline prices as Memorial Day and the annual summer traveling season approaches.

“I think the market is poised to test OPEC’s resolve,” Flynn said. “And with prices hitting $2 a gallon at some pumps, people are going to start getting outraged. When they start filling up their SUVs and boats for all those vacations, somebody’s going to be screaming.”