Crude futures rose in spite of unstable prices.
Oil prices have dropped about $11 in one week on the belief that the Organization of Petroleum Exporting Countries have all but decided to boost production. But the price drop itself has raised questions about whether OPEC ministers will follow through during the Wednesday meeting in Abu Dhabi.
Recent OPEC comments about production increases have been divided, with ministers from Venezuela and Qatar suggesting there's no need to boost supplies, while ministers from Indonesia, Nigeria and Kuwait say they're still open to increases. Saudi Oil Minister Ali Naimi, possibly the most influential member of the cartel, has struck a neutral tone, telling reporters this weekend that "the field is wide open."
"The rhetoric over the weekend has not made the picture any clearer as to which way the cartel will go," said Edward Meir, an analyst at MF Global UK Ltd., in a research note.
Prices received a lift late Monday when Iranian President Mahmoud Ahmadinejad said he opposes a production increase, according to Dow Jones Newswires. Also lending support were comments by Libya's oil chief, Shukri Ghanem, who said he does not think the cartel will increase production, according to Dow Jones.
Light, sweet crude for January delivery rose 60 cents to settle at $89.31 a barrel on the New York Mercantile Exchange. Prices spent most of the day lower, but alternated several times between losses and gains.
Concerns about the economy were weighing on prices, analysts said. Several economic reports over the past week have suggested that growth is slowing, and the Institute for Supply Management, a Tempe, Arizona-based trade group, on Monday reported that growth in the manufacturing sector slowed in November.
"There's sort of a growing feeling that we're going to see demand ... being so weak that this is going to pull prices down," said Michael Lynch, president of Strategic Energy & Economic Research Inc. in Amherst, Massachusetts.
Lynch thinks OPEC will hold production levels steady, arguing that last week's price declines have largely accomplished the cartel's goals. OPEC is also worried that an oversupplied oil market would drive prices dramatically lower, Lynch said.
Other analysts are divided in their views, but a consensus appears to be forming that OPEC will increase production if prices remain above $80 a barrel.
Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, notes that what OPEC says and what it does are not necessarily one and the same thing. The cartel could easily announce a production increase to keep prices on their downward tack, but then decline to boost supplies if prices remain low in the coming months.
"OPEC could easily fall short of any agreed upon production increase," Ritterbusch said in a research note. "OPEC's main goal out of this meeting will be to apply some bearish psychological pressures to a market that some key cartel members feel has been taken out of their control."
Other energy futures were mixed on Monday. Gasoline for January delivery rose 1.95 cents to settle at $2.2501 a gallon on the Nymex, while January heating oil fell 0.39 cent to settle at $2.5111 a gallon.
January natural gas futures fell 8.8 cents to settle at $7.214 per 1,000 cubic feet on the Nymex.
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