By Mark Shenk
Crude oil increased for a third day after OPEC’s failure yesterday to reach an agreement on production targets for the first time in at least 20 years.
Futures gained as much as 1.1 percent after what Saudi Oil Minister Ali al-Naimi said “was one of the worst meetings we’ve ever had.” Ministers from the 12-nation Organization of Petroleum Exporting Countries were unable to come to an accord in five hours of talks. Reports showed U.S. initial jobless claims rose last week and the trade deficit narrowed in April.
“OPEC’s failure to come to an agreement is still hanging over the market,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “There was a short pullback upon release of the jobs numbers, but that was quickly overshadowed by the falling trade deficit.”
Crude oil for July delivery climbed 29 cents, or 0.3 percent, to $101.03 a barrel at 9:42 a.m. on the New York Mercantile Exchange. Prices are up 36 percent in the past year.
Brent crude oil for July delivery dropped 14 cents to $117.71 a barrel on the London-based ICE Futures Europe exchange.
Saudi Arabia, OPEC’s biggest producer, Kuwait, Qatar and the United Arab Emirates were ready to supply more oil to the market, al-Naimi said. The four nations proposed a 1.5 million- barrel-a-day increase.
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.
“The people asking for an increase in production targets were the only ones capable of increasing output,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Rumors that there would be a substantial increase in quotas are the primary reason the market reacted the way it did. This will have no impact on actual supply.”
The International Energy Agency said it was disappointed that OPEC failed to agree on an increase in output, according to a statement e-mailed yesterday. “Ongoing supply disruptions, as well as the fragile state of the global economy, call for a prompt increase in supply,” the Paris-based group said.
U.S. jobless claims increased by 1,000 to 427,000 in the week ended June 4, Labor Department figures showed today in Washington. Economists surveyed by Bloomberg News projected a drop in claims to 419,000, according to the median forecast. The number of people on unemployment benefit rolls and those receiving extended payments decreased.
The U.S. trade deficit shrank 6.7 percent to $43.7 billion, the lowest level since December, Commerce Department figures showed today in Washington.
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