Oil gains for third day as Opec fails to agree on output targets

Oil rose for a third day in New York on speculation that Opec's failure to reach an agreement on output targets for the first time in at least 20 years may limit supply as US inventories fell more than analysts forecast. Futures gained as much as 1 per cent after climbing 1.7 per cent on Wednesday. The Organisation of Petroleum Exporting Countries will maintain its current output for now, said Mohammad Aliabadi, the acting Iranian oil minister and Opec president. A US government report showed crude supplies dropped the most since December. "In the short run, this is price supportive," Andrey Kryuchenkov, London-based analyst at VTB Capital said in a note. "No change to production targets means the market remains prone to price spikes, leaving it vulnerable to supply shocks and various disruptions." Crude for July delivery rose as much as 96 cents to $101.70 (Dh373) a barrel in electronic trading on the New York Mercantile Exchange, and was at $101.56. The contract on Wednesday climbed $1.65 to $100.74, the highest settlement since May 31. Prices are up 36 per cent the past year. Brent crude for July delivery was at $118.15 a barrel, up 30 cents, on the London-based ICE Futures Europe exchange. The contract yesterday climbed $1.07, or 0.9 per cent, to $117.85. It was the highest close since May 4. The European benchmark contract traded on the ICE exchange at a premium of $16.70 a barrel to US futures yesterday. Saudi Arabia, Opec's biggest producer, Kuwait, Qatar and the United Arab Emirates were ready to supply more oil to the market, according to Saudi Arabian Oil Minister Ali Al Naimi. The four nations proposed a 1.5 million barrel-a-day increase from the current 28.8 million, he said. Libya, Angola, Ecuador, Algeria, Iran and Venezuela were opposed to higher limits, according to Al Naimi. Iraq is exempt from the targets. The 11 members subject to quotas produced 26.22 million barrels a day last month, 1.375 million more than pledged, according to Bloomberg News estimates. "You may start to see higher oil prices as the question mark over future supply grows larger," said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, who predicted oil will average $113 a barrel in the third quarter. "There is now some question arising as to how willing Opec is to step in and fill the breach." Opec's lack of agreement "sent a bullish statement to the market stating that a large share of the Opec members are content with the current oil price level," Bjarne Schieldrop, chief commodities analyst at SEB AB, Sweden's third-biggest bank by market value, said in a note. "What matters on the physical side is that with little oil out of Libya and Yemen, the global oil market is likely to need up to 2 million barrels a day of extra supply quarter-on-quarter moving into the third quarter due to seasonally higher demand," he said. Oil may climb as high as $150 a barrel in the next few months after yesterday's Opec meeting and comments this week by Federal Reserve Chairman Ben Bernanke who said the US economic recovery was "frustratingly slow," JBC Energy GmbH said in an e-mailed statement. From / Gulf News