Oil and gasoline prices edged higher on financial markets Tuesday after OPEC members decided against pumping more oil, preferring to hold the cartel's production at current levels.
It was the second time in two months that the Organization of Petroleum Exporting Countries voted to keep its output steady after twice slashing production early this year, moves that helped send global oil prices higher.
OPEC, which provides about 40% of the world's crude, was under pressure to boost sales when it met a month ago because cartel member Iraq was halting its exports in a dispute with the United Nations. OPEC instead left production unchanged and called for Tuesday's emergency meeting to revisit whether the cartel needed to replace the lost Iraqi oil.
But now Iraq is expected to resume exports, crude oil supplies remain ample in OPEC's view, and oil prices are still hovering around $25 to $26 a barrel--about where OPEC likes it--despite moving lower in recent weeks.
So the 11-nation group is in no rush to flood the world with more oil, even though it is feeling pressure from the United States and other industrialized countries that see current oil prices as a key factor in their slowing economies.
"We will take whatever action is necessary to protect the target price of $25 a barrel," Saudi Arabian oil minister Ali Ibrahim Naimi said after the cartel's meeting in Vienna. "We have the flexibility to deal with a glut or a shortage."
On the New York Mercantile Exchange, crude oil for August delivery rose 29 cents, or 1.1%, to $26.24 per 42-gallon barrel. Gasoline for August delivery rose 0.71 cent, or 1%, to 72.19 cents a gallon, also on the Nymex. The markets will be closed today for the Fourth of July holiday.
The higher prices may have partly reflected traders' speculation that OPEC will consider shaving its overall production once Iraqi oil is back in the market, analysts said.
But for now, OPEC's official production quota--currently 24.2 million barrels a day--wasn't raised or lowered because supplies "are at a very high level for crude oil and gasoline, and economies are weakening," Chakib Khelil, OPEC president and Algeria's oil minister, told Bloomberg News.
Although U.S. oil supplies have been rising, they took a surprise dip in the week ended Friday as refineries processed more crude, according to the latest weekly data from the American Petroleum Institute, the industry's trade group.
Refineries operated at 96.6% of their capacity, up from 94.2% the prior week, the API reported. Even so, supplies of gasoline also unexpectedly edged lower. Gasoline stocks also had been swelling, helping to steadily lower pump prices for gasoline in California and nationwide in recent weeks.
OPEC's meeting unfolded as the U.N. Security Council was voting on whether to extend trade sanctions against Iraq. Britain on Monday indefinitely postponed a vote on a U.S.-British proposal to tighten sanctions on Iraq and introduced a new resolution instead to extend the existing U.N. oil-for-food program for Iraq for five months. The United Nations has regulated Iraqi trade since the Gulf War.
The head of Iraq's OPEC delegation, Saddam Hassan, said Iraq was prepared to renew its daily exports of 2.1 million barrels of oil "within a week" but only if the Security Council did not attach any conditions to an extension of sanctions.
Libya's acting oil minister, Abdul Karim, said he expected oil prices to decline once Iraq resumes exports and expressed hope that rising seasonal demand during the second half of the year would absorb the additional supply. Refiners typically buy more crude in the fall and winter to process into heating oil for consumers in colder climates.
OPEC already has a plan to curtail its total production by 500,000 barrels a day if the average price of its benchmark crude oils slips below $22 a barrel for 10 consecutive trading days. Conversely, OPEC says it will boost daily output by half a million barrels if its benchmark or "basket" price exceeds $28 for 20 consecutive business days.
The cartel is scheduled to meet again Sept. 26.