Oil Futures Prices Surge to Highest Levels Since ’87

NEW YORK —  Oil futures prices jumped Monday to their highest levels since November, 1987, pumped up by market speculation that OPEC nations would be able to keep a cap on their output.

Analysts said they did not expect the spike in prices to have much effect on prices of home heating oil and gasoline unless it lasted for a considerable period of time.

The February contract for West Texas Intermediate, the benchmark grade of U.S. crude oil, jumped 40 cents to settle at $18.88 a barrel on the New York Mercantile Exchange.

The last time the near-month contract settled higher was Nov. 20, 1987, amid hostilities in the Persian Gulf in the Iran-Iraq war. It settled that day at $18.93.

Although Persian Gulf troubles no longer are an issue, the price of the near-month contract for West Texas Intermediate has soared 50% since an intra-day low of $12.28 a barrel on Oct. 5.

‘Momentum’ Behind Increase

One reason for the increase is speculation that some kind of production agreement may be reached at a meeting beginning Jan. 26 in London between members of the Organization of Petroleum Exporting Countries and non-OPEC countries, according to Gene Nowak, an analyst at Dean Witter Reynolds Inc.

Nevertheless, analysts said the latest surge seemed more the result of emotion than news.

“The main thing we’ve got getting this market up is momentum. I’d have to list that as the first cause,” said Peter Beutel, assistant director of the energy group at Elders Futures Inc.

“There’s no underlying structural reason. There’s no shortage,” said John Lichtblau, president of the Petroleum Industry Research Foundation.

Prices began rising in October on expectations that OPEC members would agree to cut production as a way of propping up prices. An agreement was reached in late November and took effect Jan. 1.

Analysts said OPEC’s production has been 19 million barrels a day or slightly more, above its self-imposed quota of 18.5 million barrels but well below December’s actual production.

In a sign that many traders expect the surge in oil prices to be short-lived, prices for delivery in later months were significantly lower.

Strong Intra-Day High

The March contract for West Texas Intermediate rose 27 cents to $17.95 a barrel; the April contract rose 21 cents to $17.37 a barrel, and the May contract rose 14 cents to $16.98 a barrel.

Among refined products traded on the New York Mercantile Exchange, the February contract for unleaded gasoline rose 0.94 cent to 50.91 cents a gallon and the February contract for No. 2 heating oil rose 0.21 cent to 53.16 cents a gallon.

The intra-day trading high--the highest point reached during the trading session--was $18.93 for the February contract for West Texas Intermediate. That topped the 1988 intra-day high of $18.92 on April 18, which also preceded a meeting between OPEC and non-OPEC nations, Beutel said.

Where the Oil Is

In related news, the Middle East Economic Survey said Monday that six members of OPEC now have 70.5% of the world’s proven oil reserves.

The respected oil industry newsletter said revised estimates indicated reserves for those nations in the last five years has risen from 308 billion barrels to a total of 699 billion barrels.

It listed Saudi Arabia with 255 billion barrels, Iraq with 100 billion, the United Arab Emirates with 98 billion, Kuwait with 95 billion, Iran with 93 billion and Venezuela with 58 billion.

The five Persian Gulf states account for nearly two-thirds of the world’s proven reserves.