SINGAPORE - Oil prices rose Wednesday in Asia after OPEC said it would cut more than 500,000 barrels a day of production that exceed its self-imposed output quotas.
Light, sweet crude for October delivery rose 77 cents to $104.03 a barrel in electronic trading on the New York Mercantile Exchange midafternoon in Singapore. The contract fell $3.08 overnight to settle at $103.26, the lowest close since April 1.
A statement by the Organization of Petroleum Exporting Countries issued after oil ministers ended their meeting Wednesday in Vienna said the organization had agreed to produce 28.8 million barrels a day. OPEC President Chakib Khelil said that quota in effect meant that member countries had agreed to cut back 520,000 barrels a day of excess production.
OPEC members regularly churn out oil above the organization's overall quota, last set in November at 27.3 million barrels a day. The new production limit of 28.8 million barrels a day is above that November quota, and the statement said it reflected adjustments to include new members Angola and Ecuador and exclude Iraq, as well as Indonesia, which is withdrawing from the cartel.
The move was viewed as a compromise meant to avoid new turmoil in crude markets while seeking to prevent prices from falling too far.
"This isn't a fundamental shift in OPEC policy," said John Vautrain, an energy analyst at consultancy Purvin & Gertz in Singapore.
The output cut won't likely spark a sustained rally in oil prices as most investors remained concerned over slowing economic growth in the U.S, Europe and Japan,
"I don't think this is enough to change the bearish market sentiment in New York or London," Vautrain said. "The market already expected OPEC would scale back some of the extraordinary production of the last few months."
Keeping a lid on oil prices were expectations Hurricane Ike would veer to the west of the oil refineries and off-shore drilling platforms of the Louisiana coast region.
Early Wednesday, Ike was about 95 miles west of Havana, Cuba, moving west-northwest at 10 mph with sustained winds near 75 mph. It was expected to cross the Gulf of Mexico, strengthening to a Category 3 with winds of up to 130 mph.
Forecasters said that it could hit on Saturday morning just about anywhere along the Texas coast, with the most likely spot close to the Corpus Christi area.
"Just a few days ago it looked like it was heading for New Orleans and the coast of Louisiana," Vautrain said. "Now Ike has come off the radar screen some and the market is discounting the threat of hurricane damage."
Investors are also waiting for the U.S. Energy Department's Energy Information Administration to release its report on U.S. oil stocks for the week ended Sept. 5 later in the day. The petroleum supply report was expected to show that oil stocks fell 3.9 million barrels, according to the average of analysts' estimates in a survey by energy information provider Platts.
The Platts survey also showed that analysts projected gasoline inventories fell 4.7 million barrels and distillates went down 2.3 million barrels during last week.
In other Nymex trading, heating oil futures rose 3.66 cents to $2.9613 a gallon, while gasoline prices gained 4.82 cents to $2.7008 a gallon. Natural gas for October delivery fell 2.6 cents to $7.509 per 1,000 cubic feet.
In London, October Brent crude rose 47 cents to $100.81 a barrel on the ICE Futures exchange.