Oil prices jumped by as much as 44 cents a barrel on world markets Wednesday as two OPEC committees prepared to discuss the cartel's excess production and Iraq stepped up attacks on Iranian oil targets.
Analysts said Iraq's resumption of raids against Iran late Tuesday after a nearly three-day lull reduced chances that the two OPEC nations will accept a United Nations resolution for an immediate cease-fire in their 7-year-old war.
The Iraqi military said Wednesday that its warplanes attacked dozens of oil and industrial targets deep inside Iran. Iran vowed that it would carry out reprisals.
A cease-fire in the Iran-Iraq war would end the threat to shipping in the vital waterway and allow more oil exports to flow to the West, which could depress prices in face of the Organization of Petroleum Exporting Countries' already high production, analysts said.
Oil traded on the New York Mercantile Exchange surged by 44 cents a barrel and gained 25 cents a barrel on the European spot market.
"There was a pre-OPEC rally at the end of the day, with prices shooting up in the last hour on the Merc," said Sam Carpenter, analyst at Prudential-Bache Energy Futures in Boston.
Five OPEC oil ministers began arriving in Vienna for two days of talks on ways to curb the 13-nation cartel's surplus production. The ministerial committee, set up to motivate members to adhere to their output quotas, and the pricing panel were scheduled tet today and Friday.
On the eve of the discussions, OPEC President Rilwanu Lukman said reports by the International Energy Agency and news organizations claiming that OPEC is producing 19.7 million barrels a day were "wildly exaggerated."
In June, OPEC agreed to limit its production to 16.6 million barrels a day for the second half of the year in order to defend its $18 a barrel benchmark price.
Lukman conceded, however, that OPEC has exceeded its self-imposed production ceiling.
On the Merc, West Texas Intermediate--the benchmark U.S. crude--for immediate delivery climbed by 44 cents to $19.38 a barrel. The crude dropped by 38 cents a barrel Tuesday amid concern about OPEC's overproduction.
Buying Price Reduced
On the U.S. Gulf Coast spot market, where oil is sold to the highest bidder, West Texas Intermediate surged by 35 cents to $19.10.
Despite the price rebound, Marathon Petroleum Co. and Citgo Petroleum Co. cut their buying price for West Texas Intermediate by 50 cents to $18.50 a barrel. Official U.S. oil prices are determined by how much the refiners will pay as the oil comes out of the ground.
Home heating oil for October delivery on the Merc climbed by 1.46 cents to 52.31 cents a gallon. and unleaded gasoline was up 0.89 cent to 50.29 cents a gallon.
The American Petroleum Institute reported late Tuesday that U.S. home heating oil supplies were well below year-ago levels last week and gasoline supplies declined.