OPEC Comment Drives Oil Close to $95

Monday, Nov. 19, 2007 | 11:34 a.m.

Oil prices rose Monday with more talk among OPEC members about converting their cash reserves to the euro and away from the U.S. dollar.

There is also doubt a possible OPEC output hike next month would get more supplies to market in time for the northern winter.

Fresh purchases of the new Nymex expiry - the December contract expired Friday - were also behind some of the gains.

Light, sweet crude for January delivery rose 81 cents to $94.65 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. The contract rose $1.77 to settle at $93.84 a barrel on Friday.

In London, January Brent crude futures added 53 cents to $92.15 a barrel on the ICE Futures exchange.

New comments about the dollar arose during a weekend summit, where the heads of state of the Organization of Petroleum Exporting Countries sought to find ways to mitigate the adverse impact the battered U.S. currency has had on revenues.

Oil is priced in U.S. dollars and the currency's depreciation has contributed to rising crude prices and eroded the value of dollar reserves. Cartel officials have resisted pressure to increase oil production to ease prices.

"The fact that the OPEC members are talking about issues like the weak U.S. dollar and not talking about raising output is supportive of strong pricing and so we're seeing signs of the market gaining strength," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Iranian President Mahmoud Ahmadinejad, in Riyadh, Saudi Arabia, called the dollar a "worthless piece of paper," and said the cartel's members have expressed interest in converting cash reserves into a currency other than the U.S. dollar - a sentiment echoed by Venezuelan President Hugo Chavez, who called the euro a better option.

There had been speculation over whether OPEC would raise production at the meeting following recent oil price increases that have closed in on $100 a barrel. U.S. Energy Secretary Samuel Bodman had called on OPEC to raise output last week, but cartel officials say they will hold off any decision until the group meets next month in Abu Dhabi in the United Arab Emirates.

Some analysts say a decision to increase output next month is unlikely to strengthen supplies to meet peak winter demand season.

"Even if the OPEC ministers decide to raise output in early December, that would likely become effective only in January so by the time the oil gets to the market, the winter season would essentially be over," Shum said.

OPEC officials have also cast doubt on the effect any output hike would have on oil prices, saying the recent rise has been driven by the falling dollar and financial speculation by investment funds, rather than any supply shortage.

In other Nymex trading, heating oil futures gained 1.79 cents to $2.6050 a gallon (3.8 liters) while gasoline futures added 1.56 cents to $2.3910 a gallon.

Natural gas futures jumped 7.2 cents to $8.073 per 1,000 cubic feet.

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Associated Press Writer Gillian Wong in Singapore contributed to this report.