Oil above $101 after OPEC leaves output unchanged
Oil prices rose above $101 a barrel Thursday, extending gains from the day before, when OPEC unexpectedly left crude production quotas unchanged at a meeting that ended in deadlock.
By early afternoon in Europe, benchmark oil for July delivery was up 66 cents to $101.40 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.65 to settle at $100.74 on Wednesday.
In London, Brent crude for July delivery was up 11 cents to $117.96 a barrel on the ICE Futures exchange.
Leaders of the Organization of Petroleum Exporting Countries, a group that controls about 35 percent of global crude output, surprised investors by deciding not to boost production quotas at a meeting Wednesday in Vienna. Analysts had expected an increase of between 1 million and 2 million barrels per day.
Saudi Arabia, the group's biggest supplier, seeks oil trading in a range between $70 and $80 and supported an output hike. Meanwhile, Iran, the second-largest producer, and other OPEC members such as Venezuela and Algeria, sought to keep quotas unchanged. OPEC said the group was unable to reach a consensus and will discuss production levels again at its next meeting in three months.
Saudi oil minister Ali Naimi called the meeting "one of the worst ever."
Analysts expect Saudi Arabia would likely raise its production independently if crude prices jump much higher above $100. Disunity within OPEC could exacerbate members producing more than their quotas, which would boost global crude supplies and push prices down.
"We suspect that if prices pick up any further, those members that did want to increase quotas, led by Saudi Arabia, will simply increase supply anyway," Capital Economics said in a report.
Others said the spike in prices would be temporary.
"We were not surprised by the upward price reaction to the OPEC decision, but do not think that this is a turning point for a sustained push higher," said Edward Meir at MF Global in New York. "Instead, we see the bounce as a short-lived move that eventually will peter out due to three overriding variables."
Meir listed slowing demand, Saudi Arabia's possible output increase and the potential release of crude reserves by the U.S. government or the International Energy Agency as factors which could push prices back down.
The IEA said Wednesday it was "disappointed" with the OPEC decision and was "ready to work with its member governments and others to help ensure that markets are well supplied."
A weaker dollar also helped boost oil prices by making crude cheaper for investors holding other currencies
The euro was up to $1.4613 on Thursday from $1.4581 on Wednesday.
In other Nymex trading in July contracts, heating oil lost 0.21 cent to $3.0916 a gallon and gasoline gained 0.33 cent to $2.982 a gallon. Natural gas futures rose 3.5 cents to $4.882 per 1,000 cubic feet.
Alex Kennedy in Singapore contributed to this report.