Crude Oil Rises as OPEC Signals Curbs Supply to Bolster Prices

By Mark Shenk

Feb. 23 (Bloomberg) -- Crude oil rose to an eight-day high on evidence that the Organization of Petroleum Exporting Countries is curbing supply.

The 11 members with output quotas, all except Iraq, reduced output 3.8 percent to 25.3 million barrels a day in February, according to consultant PetroLogistics Ltd. of Geneva. The group may cut production further when it meets next on March 15, Algerian oil minister Chakib Khelil said.

“We now have concrete evidence that OPEC is making impressive cuts,” said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “Unless the economy completely craters, the OPEC output reductions will support prices.”

Crude oil for March delivery rose 70 cents, or 1.8 percent, to $40.73 a barrel at 9:25 a.m. on the New York Mercantile Exchange. Prices are down 8.8 percent this year.

Oil supply from 11 OPEC members will average 25.3 million barrels a day in February, down from 26.3 million barrels in January, Conrad Gerber, founder of PetroLogistics, said in an interview. Members have a quota of 24.845 million barrels a day.

Iran, Venezuela and Iraq said last week that OPEC is prepared to cut production again when it meets on March 15. The group agreed Dec. 17 on output constraints that would reduce supplies in January by 2.2 million barrels a day from December levels. That followed pledges to remove 2 million barrels a day in the fourth quarter of last year.

Oil Supplies

U.S. crude-oil inventories fell 138,000 barrels to 350.6 million barrels last week, the first decline this year, an Energy Department report on Feb. 19 showed.

“Last week’s inventory report may be a signal of what’s to come,” said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. “There is still plenty of oil to work through.”

Brent crude oil for April settlement increased $1.07, or 2.6 percent, to $42.96 a barrel on London’s ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.