Oil Rises to 6-Week High

Oil Rises to 6-Week High on Signs OPEC Will Keep Output Quotas
By Mark Shenk
Sept. 10 (Bloomberg)

Crude oil rose to a six-week high on speculation that OPEC ministers will maintain production targets when they meet tomorrow in Vienna.

Representatives from members including Iran, Kuwait and Qatar said in the past week there's no need to increase quotas that were set last year. Some Persian Gulf producers are discussing an increase, two delegates said today.

``The consensus remains that OPEC will do nothing tomorrow,'' said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut, energy consultant. ``There was fresh discussion about a production increase today, but opposition from Iran and Venezuela is too strong for this to occur.''

Crude oil for October delivery rose 79 cents, or 1 percent, to settle at $77.49 a barrel at 2:49 p.m. on the New York Mercantile Exchange. It was the highest close since July 31. Prices are up 17 percent from a year ago. Futures touched $78.47 at 3:54 p.m. in New York, the highest intraday price since reaching a record $78.77 a barrel on Aug. 1.

`Bullish Mode'

``Technically the market is still in bullish mode,'' said Ric Navy, a broker at BNP Paribas SA in New York. ``We're unable to maintain downward momentum. There were many opportunities for the bears to take prices lower but they failed.''

A 500,000 barrel a day quota increase will be discussed during the meeting and the timing of any increase remains undecided, one of the delegates said. The second delegate said he doubted other OPEC members would agree to such an increase. Both officials declined to be identified before the start of official talks at the group's Vienna headquarters.

``There was speculation that Kuwait, Saudi Arabia and/or the Emirates would ride to the rescue of the Fed and propose that quotas be increased,'' Beutel said. ``If they raise production the Fed can forget about inflation and concentrate on fighting what may turn into a recession.''

Two Federal Reserve bank presidents suggested that the U.S. economy is weakening after the labor market shrank in August, and that the housing market shows no sign of recovery.

`We Can Wait'

``There is no reason to increase output; the market is well supplied,'' Venezuelan Oil Minister Rafael Ramirez said today in an interview. ``We can wait until December.''

Any quota change would be viewed as a surprise. All 23 oil traders and analysts in a Bloomberg survey last week said they expect OPEC to leave its collective target unchanged.

``It's odd that the Saudis are completely silent ahead of this meeting,'' said Christopher Edmonds, the managing principal of FIG Partners Energy Research & Capital Group in Atlanta. ``I think it is likely they will float a proposal to increase quotas, probably 500,000 to 1 million barrels a day. While I don't think it goes anywhere, it will focus the discussion on the possibility for quota increases later in the year.''

Saudi Arabian Oil Minister Ali al-Naimi declined to comment to reporters in Vienna this morning. Saudi Arabia is the world's biggest oil exporter and the most influential member of OPEC.