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Oil prices hover as traders wait for decision by OPEC

Oil prices marked time Friday as traders sat on the sidelines before a long weekend and an OPEC meeting next week at which producers may boost production or even suspend their system of output quotas.

The price of benchmark Brent North Sea crude oil for delivery in July rose US$0.15 to US$36.40 per barrel in late afternoon trading in London.

New York's light sweet crude contract for July edged down US$0.06 to US$39.38 in early deals.

The reference US contract tumbled US$1.26 to US$39.44 on Thursday, showing a loss of more than US$2 from a peak of US$41.85 reached in electronic trading May 17.

Trading was winding down ahead of a three-day holiday weekend in the US and Europe, said Societe Generale analyst Frederic Lasserre in Paris.

"There's a sort of conflict between those who do not want to stay short of oil over the weekend because of the political context and those who don't want to stay long (holding oil) ahead of the OPEC meeting amid talk of raising the output quota or even suspending the quota system to send a strong message to the market," Lasserre said.

A suspension of OPEC production quotas is an option that could be discussed at the cartel's ministerial meeting in Beirut next week, a source close to OPEC said in Vienna, where the grouping is based.

"Suspending the quotas could be one of the options available to the organization to send a strong message to the markets that OPEC is doing something real to curb oil prices," he said.

His comments were in line with a report Friday in the <> European edition.

The report said OPEC producers could allow each member nation to put as much oil as it wanted on the market, which would in effect mean a suspension of the output quota mechanism.

OPEC ministers will meet in Beirut on Thursday to discuss a Saudi proposal to lift the cartel's official production ceiling of 23.5 million barrels per day (bpd) by at least 2 million bpd.

Traders also were encouraged by remarks from OPEC president Purnomo Yusgiantoro, who reportedly said the cartel would consider one option to raise output by more than 2.3 million bpd.

Yusgiantoro, who also is Indonesia's energy minister, has acknowledged that OPEC is already pumping 2 million bpd above its own official quota.

But traders noted that there were limits to how much extra oil OPEC members can export.

"They talk about a big increase in quotas, but where will they get the oil from?" asked one London trader.
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