Oil nears record amid supply concerns
NEW YORK -- Oil surged to near an all-time record above $78 a barrel Monday as OPEC prepared to meet on output policy, and following attacks on crude and natural gas pipelines in U.S. supplier Mexico.
Major energy consuming nations have called on OPEC to boost oil supplies due to strong world demand growth, but several members have said they see no need to agree to raise output at today's meeting in Vienna.
A source said core OPEC Gulf states favored a token rise in output in a gesture to consumer nations worried by the impact of high prices, but the producer group's powerhouse Saudi Arabia has not voiced a view.
U.S. light crude settled up 79 cents at $77.49 a barrel, then rose as high as $78.47 a barrel in late electronic trading, near the record $78.77 struck Aug. 1. London Brent crude gained 41 cents to settle at $75.48 a barrel.
"They favor a small increase," said an OPEC source, speaking after informal talks between oil ministers of Saudi Arabia, Kuwait, Qatar and the United Arab Emirates ahead of OPEC's meeting today.
Saudi Arabia, the world's top exporter and OPEC's most influential member, has yet to express its opinion publicly. Iran, Nigeria and Venezuela have reiterated their stance against raising output.
"If there was any doubt about the market's willingness to absorb an increase, today's price action should seal the deal," said Tim Evans, energy analyst at Citigroup Futures Research.
Further support came after six explosions caused by sabotage hit pipelines in Mexico, one of the top suppliers of crude to the U.S., disrupting oil and natural gas. The worst damage from Monday's blasts was to two 48-inch diameter natural gas pipelines, but one major 30-inch oil pipeline was also hit. Pemex said exports would not be affected, but later added the disruption cut around 25 percent of Mexico's natural gas supply, state oil firm Pemex said. Traders were also watching to see if a tropical wave in the Atlantic could become a serious storm and potentially hit oil facilities.
"We think that the current market is very tight," said Nobua Tanaka, executive director of the International Energy Agency, which advises industrialized countries on energy.
Saudi Arabia has told its customers in Asia and Europe it would keep its crude oil supplies steady for October from September levels.