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Big rally for oil; OPEC mulls output cuts
Crude near $60 on forecasts of colder weather and concerns over possible cut in OPEC's production levels.

NEW YORK (CNNMoney.com) - Oil prices rose back near $60 Friday on talk of a push by some member states to have OPEC cut production and forecasts of more cold weather throughout the United States.

Oil, which reached a nearly two-month low Thursday before turning higher in afternoon trading, was up sharply Friday morning, heading toward $60 a barrel -- a mark it had dropped below on Tuesday for the first time in 2006.

Light, sweet crude for March delivery settled up $1.42 to $59.88 a barrel on the New York Mercantile Exchange.

Fadel Gheit, oil analyst for Oppenheimer & Co., said there is talk that OPEC members who are already pumping at capacity -- including Iran, Venezuela and Libya -- are concerned with the recent fall below the $60 level and are pushing members with excess capacity -- such as Saudi Arabia, Kuwait and the United Arab Emirates -- to trim production.

"There is talk that OPEC is being spooked by the sharp decline," he said.

OPEC President Edmund Daukoru, who is also Nigeria's Minister of State for Petroleum, said Friday it was too early to say whether the exporters' group would cut oil output at its next meeting, according to Reuters.

"It is a little too far ahead to predict what (the market) will do," said Daukoru.

Analysts say that at the time of the OPEC meeting, scheduled for March 8, the price could be driven higher by resurgent tension over Iran, making it politically very difficult for the group to cut production even if stock levels are high.

On Thursday, Iran rejected claims by the International Atomic Energy Agency (IAEA) that it had resumed uranium enrichment, Reuters said. Iran said it is still ready to negotiate on a Russian proposal for resolving a dispute with the West.

The IAEA decided at the start of this month to refer Iran to the U.N. Security Council over its nuclear ambitions and will meet March 6 in Vienna, just ahead of the OPEC meeting, to review the situation.

Buying also has been spurred by dealers reluctant to cut positions ahead of a long weekend, with U.S. markets closing Monday for Presidents Day.

"I haven't seen any news move this morning, but the (reason for the) rise is probably (that) people don't want to sit on their position, short or long, before the holiday weekend," Gheit said.

Oil prices have steadily declined since the beginning of February, partly driven by swelling U.S. inventories of oil and fuel through the week-ago period. But since then the Northeast was hit by its heaviest snowstorm of the year, and cold weather is expected to return to much of the nation this weekend.

The Northeast is the nation's largest user of oil-based heating oil to heat homes; other regions depend on natural gas as the primary source for heat.

-- from staff and wire reports

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