Crude rose, reversing earlier losses, amid speculation the Organization of Petroleum Exporting Countries may reduce supply in response to slowing demand.
Futures gained as much as 0.3% in New York. The International Energy Agency on May 12 trimmed its 2011 global oil demand forecast for the first time as this year’s price rally begins to weigh on consumers. There is a 65% chance OPEC will raise its production quota to lessen the risk high prices will curb demand, Societe Generale SA said in a report.
Crude for July delivery rose as much as 29 cents to $99.30 U.S. a barrel in electronic trading on the New York Mercantile Exchange and was at $99.14 U.S. Prices are up 39% the past year. Brent crude for July delivery was at $114.78 U.S. a barrel, up 30 cents, on the London-based ICE Futures Europe exchange.
OPEC may raise output quotas by 1.5 million barrels a day versus actual production when it meets tomorrow, said Societe Generale analysts led by Michael Wittner in New York. "This meeting result is not a slam dunk, though, with a 65% probability and a medium level of conviction," the report said.
The producer group announced its biggest-ever supply cuts in late 2008 amid a collapse in global demand, capping production at 24.845 million barrels a day for all members except Iraq, which is exempt from the quota system. Its compliance rate with those limits was 69% in April, OPEC said in its monthly report on May 12.
The 11 OPEC members bound by the output quotas produced 26.2 million barrels a day in May, or about 1.4 million barrels more than they pledged, according to a survey of analysts, producers and oil companies. Total supply including Iraq was 28.9 million barrels a day last month.
The global crude market would "welcome" increased oil production from OPEC, Vitol Group Chief Executive Officer Ian Taylor said.
Brent has advanced 21% this year as unrest in the Middle East and North Africa toppled leaders in Tunisia and Egypt and spread to Libya. The fighting in Libya has removed about 1.5 million barrels a day of output from market.
A report from the U.S. Energy Department tomorrow may show U.S. gasoline stockpiles climbed by one million barrels last week from 212.3 million, according to a survey of analysts. Crude inventories probably dropped 1.5 million barrels, the survey shows.
Options traders increased bets that oil prices will fall further. The most-active option yesterday was the July $95 U.S. put, which rose 17 cents to 79 cents U.S. The second-most active contract was the August $90 U.S. put, which climbed 13 cents to $1.05 U.S.
