Analysts: Oil Hyped By OPEC Speculation
By Tony McAuley
NEW YORK (Reuters) - Oil prices are on the rise, giving sagging oil company shares a reprieve and raising worries that the cheapest gasoline prices in decades may soon be a thing of the past.
''Don't believe the hype,'' oil experts say.
A 20 percent rise in crude oil prices in the past three weeks is built mostly on speculation that the fractious members of the Organization of the Petroleum Exporting Countries (OPEC) can set aside their differences and agree to cut production for the third time in less than a year, analysts said.
A deal at the OPEC oil ministers' next meeting in Vienna on March 23 is possible but not likely, according to the experts. Oil prices got another jolt higher Monday after a weekend meeting of ministers from OPEC's top two exporters, Iran and Saudi Arabia, which officials described as ''positive.'' But Venezuela's oil minister Monday threw cold water on the prospect for a deal when he told oil unions in his country that he wouldn't agree to any more production cuts.
''Oil prices are hyped up quite a bit but there is nothing concrete so far that indicates OPEC members have resolved their dispute,'' said Nizam Sharief, an oil consultant at Hornsby & Co. in Houston. ''If Venezuela is not going to cut back, I don't think the Saudis or anyone else will be cutting back on their own.''
At mid-afternoon Monday, the West Texas Intermediate crude oil futures contract for April delivery was up 35 cents at $13.65 a barrel on the New York Mercantile Exchange, after hitting an intraday high of $14.03 a barrel earlier Monday.
Oil prices have more than halved in the past two years, hitting a 12-year low of $10.25 a barrel in New York in December. The Standard & Poor's Oil and Gas share index also halved over the same period and has followed oil prices up in the past three weeks, rising about 15 percent.
At mid-afternoon Monday, Exxon Corp.'s stock was up 75 cents to $70.375 a share; Mobil Corp.'s added 50 cents to $88.125; Chevron Corp. fell 68.75 cents to $80.625, and Texaco Inc. slipped 62.5 cents to $50.0625.
But whether the oil price rise is sustained or proves to be another fleeting rally depends on OPEC acting as a cartel, something it hasn't been able to do in the recent past.
The group agreed last year to cut production by 2.6 million barrels per day in an effort to curb the world oil glut. But it never got full compliance and production has remained well above target. Meanwhile, Iraq has been allowed effectively to produce as much as it can because of its special deal wit the United Nations, last week exporting nearly 2.7 million barrels per day, the highest since the 1991 Gulf War.
''OPEC has talked the market up but time and again, when the dust has settled, the market was left disappointed,'' said Richard Redash, an oil sector analyst for Prudential Securities in New York.
Retail gasoline prices take time to follow crude prices and still are generally below $1 a gallon, according to the American Automobile Association. The AAA, which monitors gasoline prices at the pump, said there is no sign of any big rise yet.
The AAA reported last month that the national average price for regular unleaded gasoline fell 4.4 cents a gallon to 97.9 cents a gallon, the lowest level in 20 years. The next national survey will take place on March 16. But recent checks with members show prices steady, apart from pockets like a region in Ohio where an end to a local price war brought average prices up from 73 cents a gallon to closer to the national average, said Mitch Fuqua, an analyst at AAA.
He pointed out that gasoline prices usually rise seasonally in the run-up to peak demand around Memorial Day.
''We wouldn't be surprised to see an increase in the price of gas because of seasonal factors but we don't anticipate here is going to be a huge increase in prices,'' Fuqua said.
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