May 28 (Bloomberg) -- Crude oil rose above $64 a barrel for the first time in six months after OPEC decided today to leave production quotas unchanged on speculation demand will rise as the global economy recovers.
Saudi Arabian Oil Minister Ali al-Naimi said that the group opted not to alter its output targets because “prices are good, the market is in good shape.” Oil should stay in a $60 to $70 range for the rest of the year, OPEC Secretary General Abdalla el-Badri said. The gain accelerated after a report showed that U.S. oil supplies fell the most since September.
“The outcome, no change in OPEC quotas, was expected, but the surprise was Saudi Arabia being very explicit about a price objective for the first time since the price band mechanism in the early part of this decade,” said Lawrence Eagles, global head of commodities research at JPMorgan Chase & Co. in New York.
Crude oil for July delivery rose $1.11, or 1.8 percent, to $64.56 a barrel at 11:16 a.m. on the New York Mercantile Exchange. Futures reached $64.99, the highest since Nov. 10. Prices are up 45 percent this year.
The Organization of Petroleum Exporting Countries sought to maintain a benchmark price, comprised of seven oil grades, between $22 and $28 a barrel beginning in 2000. The group abandoned the price band in January 2005.
“They have now set economic parameters within which the market will now function, on the upside at least,” Eagles said.
Saudi Arabia’s al-Naimi forecast that oil may rise to $75 a barrel by this year’s third or fourth quarter. The group’s next meeting will be on Sept. 9, he said.
Maintain Discipline
“I don’t think there was any way they could justify cutting again at $60-plus crude,” said Mike Wittner, head of oil research at Societe Generale SA in London. “If they can maintain discipline and limit the production creep that comes with higher prices, stocks should start to come down.”
Other OPEC ministers said the group will work toward finishing previously announced reductions. OPEC has yet to complete output cuts totaling 4.2 million barrels a day that members agreed to late last year.
The production ceiling is 24.845 million barrels a day for 11 of its members. They pumped 25.812 million barrels a day in April, a May 13 report from the group showed. Iraq has no quota.
“Given the recent rally to above $60 a barrel and a global economy in recession, it would not have been possible to justify further cuts,” said Harry Tchilinguirian, senior oil market analyst at BNP Paribas SA in London.
Prices also increased after a government report showed a larger-than-expected gain in orders for U.S. durable goods, adding to evidence that that recession is easing. The 1.9 percent increase reported by the Commerce Department today in Washington was the largest since December 2007. Economists forecast a 0.5 percent gain in a Bloomberg News survey.
U.S. Inventories
U.S. crude oil inventories declined 5.41 million barrels to 363.1 million last week, according to the Energy Department. It was the biggest drop since September, when platforms, ports and refineries along the Gulf of Mexico were shut because of hurricanes. A 150,000-barrel decline was forecast, according to the median of 12 analyst responses in a Bloomberg News survey.
The Energy Department released its supply report today at 11 a.m. in Washington, a day late because of the Memorial Day holiday.
The American Petroleum Institute said yesterday that U.S. oil supplies dropped 2.82 million barrels to 364.7 million in the week ended May 22.
API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
Brent crude for July settlement gained $1.53, or 2.5 percent, to $64.03 a barrel on London’s ICE Futures Europe exchange. Futures touched $64.17, the highest since Nov. 5.
