Oil Prices Rise on OPEC Rumors

NEW YORK -- Oil prices jumped 82 cents yesterday, to $57.13 a barrel in midday trading, on reports the Organization of Petroleum Exporting Countries (OPEC) began talks about additional production cuts and energy shortages due to international conflicts between Russia and Belarus, The Associated Press reported.

The increase comes after last week's fall due to warm weather in the U.S. Northeast. "Because of the steep drop last week, the market is due for a rebound, and that's what we're seeing this morning," Victor Shum, analyst for Purvin & Gertz, told the AP.

Supporting the price hike are reports that Belarus ordered a halt of Russian oil deliveries to Germany, Roland and the Ukraine. In response, the head of Russian state pipeline operator Transneft, Semyon Vainshtok, accused the country of siphoning off Russia's oil for Europe, the report stated. The countries continue to disagree over oil duties, where Russia sought to halt Belarus from re-exporting petroleum products made from cheaply processed Russian oil.

If the dispute is not resolved shortly, it could cause oil prices to rise as sellers in other markets raise their own prices, Jason Schenker, economist with Wachovia Corp., told the AP.

"If this situation is not resolved with relative expediency, the market may interpret it as a repeat of the Ukraine situation from last year, which would have bullish energy price implications," he said. "The magnitude of the reaction of energy markets will be directly dependent on how protracted this situation becomes or appears likely to become."

Another factor for the increase in price is OPEC's anxiety over recent price declines. Vienna oil company, PVM Oil Associates, stated that the market's recovery was partly due to "reports that OPEC might hold an extraordinary meeting prior to its scheduled meeting on March 15," the AP reported.

OPEC members began talks for an additional output cut in response to the 10 percent drop in oil prices since the beginning of the year, the AP reported, citing a Dow Jones Newswire report.

"OPEC almost has to do something here, and that is something we need to be ready for," Peter Beutel of Cameron Hanover, told the AP.

Expect more ups and downs within the crude oil market, as many factors besides the weather, force prices in either direction. "With all the current bearish exuberance, we remind ourselves that Chinese demand, the overall [growth in the] economy, and the various geopolitical situations are hardly gone and should not be forgotten," said John Kilduff, senior vice president for energy risk management at Fimat USA.