Oil Prices Rise Before OPEC Meeting

OPEC logo on a oil barrel with an oil rig in the background
AP / CBS
Oil prices rose above $72 a barrel Tuesday ahead of an OPEC meeting in Venezuela and the start of the Atlantic hurricane season later this week.

The Memorial Day holiday marked the beginning of the peak driving season in the United States, a period when energy traders became extra skittish about any loss of oil production or refining capacity.

Some of the top international concerns keeping prices elevated include diplomatic tensions between the West and Iran over Tehran's nuclear goals, violence in Nigeria and rising energy demand in China.

Light sweet crude for July delivery rose 90 cents to $72.27 a barrel on the New York Mercantile Exchange. It had settled Friday at $71.37 a barrel.

July Brent crude at London's ICE Futures exchange gained 78 cents to $71.37 a barrel.

"Thursday's OPEC summit is going to be the big fundamental story of the week," said Citigroup oil analyst Timothy Evans.

Venezuelan President Hugo Chavez wants the cartel to cut production — a familiar refrain from a country known as a price hawk — but other OPEC countries, including Qatar and the United Arab Emirates, are calling for no change to the group's official 28 million barrel per day production quota.

"With uncertainty about Iran and oil prices soaring, all eyes are on Caracas, were the OPEC ministers will be meeting," reports CBS News foreign affairs analyst Pamela Falk. "Particularly because oil prices rose after the news that Venezuela is calling for a production cut."

Traders also are watching the June 1 official start of the U.S. Gulf of Mexico hurricane season, which is expected to be more active than normal, but not as harsh as last year's. Hurricanes Katrina and Rita caused heavy damage to offshore platforms and pipelines, as well as onshore refineries, sending gasoline prices skyrocketing amid spot shortages and emergency imports from Europe.

Oil industry and government officials asserted at a news conference in Washington that they would be better prepared this summer to respond to any hurricane-related damage to energy infrastructure, mainly because of better coordination and communication now in place.

"We did it as good as we could" following last year's hurricanes, said Red Cavaney, head of the American Petroleum Institute. "But we look forward to doing it better next time." Cavaney said the U.S. will again be able to rely on Europe for emergency gasoline imports should they become necessary.

Elmer P. Danenberger, chief of offshore regulatory programs at the Minerals Management Service, said the industry has made significant progress in the past year strengthening offshore drilling units so that they are better moored to the ocean floor. "As much as possible has been done in the off-season," Danenberger said.

On Tuesday, Nymex gasoline futures shot up by almost a nickel a barrel to $2.1850 a gallon while heating oil prices were virtually unchanged at $1.9895 a gallon.

Natural gas prices rose 13.6 cents to $6.185 per 1,000 cubic feet. Natural gas futures are near a one-year low and some analysts say that if inventories continue to grow at this pace, the country could run out of natural-gas storage capacity before winter, a prospect that should exert downward pressure on prices.