Crude oil prices closed at record price of $56.46 a barrel
Wednesday, March 16, despite a decision by OPEC to produce more oil.
Driven by fears of a supply crunch next winter, the
Organization of Petroleum Exporting Countries agreed to immediately widen the
spigot to pump an extra half-million barrels of oil a day and to approve a
similar boost later if prices do not fall.
However, there was not significant reaction in the oil
markets because OPEC members – who are supposed to be bound by the
organization’s production quota – were already producing 700,000 barrels a day
more than the set amount, The Associated
Press reported. That means no extra supply will actually be added.
In response, light, sweet crude for delivery in April jumped
as much as $1.30 to $56.35 a barrel in afternoon trading on the New York
Mercantile Exchange, where traders were also reacting to a U.S. government
report that showed a steep decline in gasoline and heating oil inventories last
The highest New York exchange settlement price for crude is
$55.17, set twice last October. The previous high price for oil during the day,
set in October 2004, was $55.67.
The decision to raise output will officially raise the
group’s ceiling to an all-time high of 27.5 million barrels a day. But,
according to AP reports, OPEC is already producing close to 29.5 million
barrels a day, when Iraqi production quota-busting by other nations is factored
in. Iraq is exempt from OPEC quotas.
Comments from OPEC oil ministers earlier in the week left at
least one oil analyst saying the cartel’s decision was not surprising. However,
that analyst – Ed Silliere, a broker at Energy Merchant Intermarket Futures in
New York – told The AP that the
sharp decline in gasoline supplies that took place last week did upset
“The gasoline number was a complete shock,” he told the news
The U.S. inventory of unleaded gasoline – as measured by the
Department of Energy – dropped by 2.9 million barrels last week to 221.4
million barrels. However, the marketplace still has 9 percent more gasoline
than it had at the same time last year, The
U.S. supplies of distillate fuel, which include heating oil,
diesel and jet fuel, shrank by 1.9 million barrels to 107.3 million barrels, or
about 1.5 percent less than a year ago.