Oil prices rebound on reports of possible OPEC output cuts, Nigerian unrest

Thursday, October 5th 2006, 8:49 am
By: News On 6

WASHINGTON (AP) _ Oil prices settled above $60 a barrel Thursday on expectations that OPEC would soon cut its output, though a representative of Saudi Arabia denied there was a deal to reduce production.

Concerns also grew about the stability of world oil supplies amid violence in Nigeria and as the United Nations considers possible sanctions against Iran over its nuclear program .

The president of the Organization of Petroleum Exporting Countries, Edmund Daukoru, did not clearly confirm or deny a slew of reports attributed to anonymous sources from member countries who said the cartel plans to trim its daily production by 1 million barrels.

A spokesman for Saudi Arabia's U.S. ambassador said there is no plan in Riyadh to crimp supplies in order to prop up prices, however. ``A decision hasn't been made,'' Nail al-Jubeir told The Associated Press in a telephone interview.

Oil prices initially jumped by more than $1 a barrel amid the uncertainty, then eased back as traders said they doubted whether all OPEC members would go ahead with any informal agreement intended to stem a 24 percent decline in prices since mid-July.

Daukoru, who is also Nigeria's oil minister, said the group was considering holding an emergency meeting before its scheduled Dec. 14 conference.

``We each have an idea of what is an appropriate response ... we agree that something needs to be done,'' Daukoru said, referring to possible cuts in output. ``We will have to agree on how much, how soon and how we distribute it among the member countries.''

Daukoru said OPEC members would only agree on a formal position on oil cuts after consultations.

``I called my friends at the OPEC secretariat in Vienna and they said they were baffled ... that there is no agreement,'' said Manouchehr Takin, an analyst at the Centre for Global Energy Studies in London and a former researcher for OPEC.

Nevertheless, OPEC ministers may be working informally on an agreement whereby member countries individually pledge to curtail production. ``That would be logical,'' Takin said, given how quickly oil prices have fallen from a July peak above $78 a barrel.

Dow Jones Newswires, citing an OPEC governor, said the cartel's ministers have agreed to cut output by 1 million barrels a day, including 300,000 barrels a day from Saudi Arabia.

A spokesman for Saudi Aramco declined to comment; the Saudi petroleum ministry could not be reached for comment.

PFC Energy analyst David Kirsch said he was operating on the assumption that OPEC is already making gradual output reductions to tighten up global inventories that are rising due to slower economic growth and increased production from non-OPEC countries.

Kirsch speculated that OPEC _ and in particular, Saudi Arabia, its largest producer _ may choose to maintain a low profile on any output cuts until after the mid-term elections in the United States.

``That's probably the leading factor why they're not more forthcoming about the details,'' he said.

Light sweet crude for November delivery settled Thursday at $60.03 a barrel on the New York Mercantile Exchange, an increase of 62 cents. Oil prices climbed as high as $60.97.

Prices temporarily fell to a fresh seven-month low on Wednesday after U.S. government data showed rising inventories of crude, gasoline and heating oil _ and following comments from Saudi Arabia's ambassador to the U.S. that suggested no formal OPEC cut was imminent.

But news late Wednesday of violence in Nigeria's oil-rich southeastern delta brought buyers back into the market. Nigeria's light, sweet crude oil is particularly desirable for the production of transportation fuels and any loss of output has the potential to spook the market.

On Thursday, Britain's U.N. ambassador said the U.N. Security Council will start discussing a resolution next week that would impose sanctions on Iran for refusing to suspend uranium enrichment. Many oil traders fear that Iran, OPEC's No. 2 producer, could take oil off the market in retaliation to any sanctions.

``Geopolitical sentiment has contributed to breaking the recent slide,'' said Paul Harris, energy analyst at Bank of Ireland Global Markets in Dublin.

In other Nymex trading, heating oil futures gained 1.5 cent to settle at $1.692 a gallon while gasoline futures rose 1.87 cent to settle at $1.5165 a gallon. Natural gas futures rose 30.3 cents to settle at $6.298 per 1,000 cubic feet.