NEW YORK (CNNfn) - U.S. crude oil prices surged to nearly $35 a barrel in late afternoon trading Wednesday, their highest level since January 1991, as anxious dealers feared OPEC will fail to ease a supply shortage at its meeting early next week.|
U.S. light sweet crude futures for October delivery rose $1.12 to $34.95 a barrel. London's benchmark Brent for October delivery gained $1.32 to $34.30.
Analysts noted that even if OPEC raised production, the crude oil will still need to be converted to refined products, such as heating oil. That means any reduction in prices to consumers wouldn't be felt for at least a month.
A build-up in stocks, which have recently languished near a 24-year low, could slow the increase in oil prices. "With oil stocks so low, there's a huge amount of concern," said Peter Beutel, oil analyst at Cameron Hanover.
Traders also expressed caution ahead of the American Petroleum Institute's (API) weekly U.S. oil inventory report, which showed crude oil stocks up 3.13 million barrels to 289.1 million barrels last week, and distillate inventories up 658,000 barrels to 112.9 million barrels.
The crude oil gain, while larger than analysts had forecast earlier in the day, still left stocks to a daunting 21.8 million barrels below last year's level.
The distillate build, meanwhile, was smaller than expected and left stocks 28.5 million barrels below last year's level, renewing fears over shortness of heating oil supplies this winter.
High prices are rattling the United States and other consumers of crude oil. France has been gripped by a fuel shortage after truckers paralyzed gasoline and diesel distribution in France to protest the cost of filling their tanks.
European Union Energy Commissioner Loyola de Palacio said Wednesday she wanted oil-producing nations to agree to a "common objective" to work towards a stable oil price.
"What we are trying to do is to get them to agree on common objectives with us, a common objective which should be a stable oil price, a non-volatile oil price," de Palacio. "We are talking about $20, $20 plus" for a barrel of crude oil.
OPEC's 11 states, which supply about 40 percent of the world's crude, blame the consumer protests on tight supplies of refined products such as heating oil, rather than a shortage of crude, the raw material.
Influential Saudi Oil Minister Ali al-Naimi said the world's biggest oil exporting nation sees "no problem putting additional crude oil into the market, but we must be extremely careful that efficiency is required by people running refineries. Eventually people will realize that the industry is living with less inventories. Eventually a lot of this price is hype."
Oil superpower Saudi Arabia told Reuters it had pumped an extra 600,000 barrels per day since July in an attempt to restrain rocketing petroleum prices.
The Organization of Petroleum Exporting Countries meets Sunday in Vienna to consider hiking output, with analysts predicting another 500,000 barrels a day might not be enough to prevent high gasoline and heating oil prices this winter in the Northern Hemisphere.
Oil output could increase this Friday by a half-million barrels if prices stay above $28 a barrel. That would fulfill the conditions of OPEC's mechanism by which the cartel agreed to raise output if its benchmark oil price broke out of the range $22-to-$28 a barrel for more than 20 consecutive days.
-- from staff and wire reports