Oil prices rise to near $78 ahead of OPEC meeting

Oil prices rise to near $78 ahead of OPEC meeting

Singapore, Oil prices extended gains from a late rally in the previous session, driven by expectations OPEC will maintain its current output at a meeting later today.

Light, sweet crude for October delivery added 37 cents to $77.86 a barrel in Asian electronic trading on the New York Mercantile Exchange by midmorning in Singapore, after earlier Tuesday rising as high as $78.32. Today, the Nymex crude contract gained 79 cents to settle at $77.49 a barrel.

“The drive to the $78-level, near the record $78.77 high, has been short-covering ahead of the OPEC meeting," said Victor Shum of Purvin & Gertz in Singapore. Short-covering refers to buying by investors who had bet prices would fall. Crude futures hit a record $78.77 a barrel on the New York Mercantile Exchange in early August.

Shum said that while the general expectation was for the Organization of Petroleum Exporting Countries to keep output steady at its meeting in Vienna Tuesday, there was speculation that Saudi Arabia is trying to persuade other OPEC ministers to increase production.

“The oil market is generally in a bullish mood. There’s some talk about OPEC pushing for some output increase so there’s also some suspense in the market before the meeting," Shum said. “The Saudis might push for a symbolic increase in output targets to try to calm the market before the peak winter demand."

OPEC, which produces about 40 percent of the world’s oil, has long been expected to hold production levels steady at the meeting, part of the reason oil and gasoline prices rose last week. Many OPEC ministers have said oil supplies are fine, blaming refiners for high gas prices.

But the Saudis are worried that high oil and gasoline prices could be pushing some countries toward recession, some analysts say. The Saudis think reducing prices by boosting output would be enough to stave off any recession threat, which would benefit oil-producing countries in the long run by keeping demand steady, the analysts say.

October Brent crude added 28 cents to $75.76 a barrel on the ICE futures exchange in London.

Heating oil futures gained 1.59 cents to $2.1875 a gallon (3.8 liters) while gasoline prices advanced 1.24 cents to $1.9910 a gallon.

Natural gas futures, meanwhile, added 8.4 cents to $5.975 per 1,000 cubic feet, after jumping nearly 40 cents Monday after a series of explosions hit natural gas pipelines owned by Mexico’s state-owned oil company.

A shadowy leftist guerrilla group claimed responsibility for the explosions that ripped apart at least six Mexican oil and gas pipelines, causing hundreds of millions of dollars in lost production.

Left-wing guerrillas have struck the country’s natural gas infrastructure in the past. The U.S. imported 12.7 million cubic feet (360,000 cubic meters) of natural gas from Mexico in 2006, about 0.3 percent of total imports that year.