Oil prices climb as OPEC debates production level


THE price of oil is rising as OPEC ministers debate how much oil to produce while the global economy is experiencing weaker growth.

Benchmark crude rose US$1.21 to US$83.84 per barrel yesterday in New York. Brent crude, which is used to price international varieties, gained 21 cents to US$96.92 per barrel in London.

Separately, natural gas prices jumped more than 10 percent after the government said supplies increased less than expected last week. It was the biggest gain for the fuel since late October.

Members of the Organization of the Petroleum Exporting Countries were divided over oil production heading into the meeting in Vienna. An OPEC report this week showed that members are producing nearly 33 million barrels a day, nearly 3 million barrels more than its overall quota.

Saudi Arabia has increased production to offset supply losses from Iran, which is struggling to export crude because of Western sanctions imposed as part of a dispute over its nuclear program. Iran has supported production cuts to try to drive up prices, which have fallen about 20 percent since the first of May.

Many analysts expect the OPEC ministers to leave the production level unchanged.

The OPEC meeting occurred against a backdrop of economic uncertainty. Slowing economies in Europe, the US and China that have cut demand for oil and energy products and kept financial markets on edge for weeks.

Many investors are awaiting the outcome of a weekend election that could determine if Greece leaves the euro currency union.

The overall region still is searching for the best solution to its debt crisis. Spain's borrowing costs surged after a ratings agency downgraded Its credit rating. Italy's borrowing costs also jumped because it could follow Spain in asking for a financial bailout.

Meanwhile, applications for jobless benefits in the US rose last week, according to the Labor Department. That is an indication the jobs market remains weak.

Analysts are speculating that the uncertainty in Europe and the US could prompt central bankers to approve additional measures to promote economic growth.

In other trading, natural gas prices skyrocketed after the Energy Department reported that natural gas in storage grew by 67 billion cubic feet to 2.944 trillion cubic feet for the week ended June 8. That was less than analysts expected. Total inventories were 29.2 percent above the five-year average of 2.278 trillion cubic feet.

Natural gas futures rose 27 cents to US$2.459 per 1,000 cubic feet.

Heating oil rose 1 cent to US$2.62 per gallon and gasoline futures gained 1 cent to US$2.66 per gallon.

At the pump, the national average for gas fell less than a penny overnight to US$3.532 per gallon, according to AAA, Wright Express and the Oil Price Information Service. The price is nearly 20 cents less than a month ago.



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