U.S. oil prices strengthened further Wednesday as Conoco reported that it will raise the price that it is willing to pay for West Texas Intermediate, the nation's benchmark crude, by 40 cents a barrel Sept. 1.
Analysts said the action by Conoco, which has taken the most aggressive stance on pricing among the large oil companies, signaled a rebound in domestic oil prices in face of a slight upturn in demand for petroleum products and firmer pump prices.
Conoco, a Du Pont subsidiary, said it is increasing the price that it will pay for West Texas Intermediate and West Texas Sour, the principal heavy crude, by 40 cents to $27.15 a barrel.
Conoco, which reviews its domestic postings monthly, lowered prices on the two key grades by 30 cents a barrel July 1.
Domestic crude prices are determined by how much the buyer is willing to pay at the wellhead as the oil comes out of the ground.
Conoco also is lifting the price that it will pay for eight other grades of crude by 40 cents a barrel and two additional grades by 50 cents a barrel.
In Houston, a spokesman for Conoco said the price moves "reflect current market conditions."
Industry observers predicted that other oil companies would follow the lead of Conoco and Sun, which last week boosted its posted prices for West Texas Intermediate by 25 cents to $27.50 and for West Texas Sour by 50 cents to $27.25 a barrel.
But the largest U.S. oil firms, such as Exxon and Mobil, are expected to maintain their buying price for West Texas Intermediate at $28 a barrel.
These oil industry giants, which have large stakes in producing domestic oil as well as refining it into petroleum products, were more reluctant to lower their postings than smaller companies when domestic oil prices began skidding last November.
U.S. crude prices had tumbled more than $3 a barrel by late June, when prices on the international spot market--where more than half of the world's oil is sold to the highest bidder--began inching higher.
Analysts said the consuming nations, which allowed inventories to shrink to extremely low levels in anticipation of still lower prices, have been forced to rebuild stocks in preparation for peak winter demand.