Oil prices soar as OPEC stands pat on output

NEW YORK (CNNMoney.com) -- OPEC dashed hopes that it would step up production at its meeting Wednesday, news that sent oil prices shooting back towards the $90 a barrel mark in early trading.

Up until a few days ago, investors had been hoping that the cartel made up of 13 of the world's leading oil producers would increase production by least 500,000 barrels, news that had helped send oil prices tumbling from a record high near $100 a barrel to under $90.

But the statement of the group's oil ministers released after their meeting in Abu Dhabi, United Arab Emirates, said that "market fundamentals have essentially remained unchanged, with the market continuing to be well supplied and commercial crude/product stocks remaining at comfortable levels."

The news sent oil prices sharply higher in early trading Wednesday. The price of a barrel of light sweet crude shot up $1.58 to $89.90 in early electronic trading.

Trading in oil prices will likely be affected by the weekly report on U.S. fuel inventories, due at 10:30 a.m. ET. The report is expected to show crude stockpiles fell by 800,000 barrels, while gasoline supplies grew by 900,000 barrels, according to forecasts of analysts surveyed by Dow Jones Newswires.

The OPEC statement blamed geopolitical issues and speculation in the markets for the rise in oil prices, rather than the group's production levels. But it said that it will keep an eye on prices, and announced another extra meeting set for Feb. 1, ahead of its next regularly-scheduled meeting March 5.

"The conference again emphasized the Organization's determination to take every measure deemed necessary to keep market stability through the maintenance of supply and demand in balance," the group's statement said.

But the news does not necessarily mean there won't be additional oil coming onto the market.

Oil analysts, such as Leo Drollas, chief economist at the London-based Center for Global Energy Studies, said ahead of the meeting that even though he expected OPEC to leave production unchanged, he wouldn't be surprised to see Saudi Arabia quietly throw more oil on the market to keep prices down.

"You've got to draw a distinction between what the Saudis do at meetings and what they do behind closed doors," he told CNNMoney.com on Tuesday.

Economic worries, particularly about a slowdown in the United States, the world's largest oil consumer, is one reason the cartel may have agreed to hold output steady. A slowdown in the economy tends to cut back on oil use. In October, OPEC supplied 31 million barrels of the world's 86 million barrel daily oil consumption.

But concerns that high oil prices might help to tip the U.S. into a recession is one reason that the Saudis might be willing to boost production and why OPEC might yet announce an output increase early next year.

But if increased production doesn't stave off a recession, oil prices could fall sharply - which is what OPEC fears the most. In 1997 OPEC increased output just before an Asian economic crisis, resulting in oil falling to $10 a barrel a year later.

The Saudis, who produce roughly a quarter of the oil coming out of OPEC, are the only cartel member with the capacity to significantly increase production.

The EIA doesn't issue forward-looking projections for each country, but it estimates that OPEC will go from pumping 30.7 million barrels a day in November to 31.5 million barrels a day by January. An increase of 800,000 barrels a day would have to come primarily from Saudi Arabia.