Bloomberg Oil Rises to 6-Month High on OPEC Announcement, Supply Decline

May 28 (Bloomberg) -- Crude oil rose to a six-month high after OPEC decided to leave production quotas unchanged and a government report showed that U.S. inventories declined.

Saudi Arabian Oil Minister Ali al-Naimi said that the group opted not to alter its output targets because “prices are good, the market is in good shape.” Oil should stay in a $60 to $70 range for the rest of the year, OPEC Secretary General Abdalla el-Badri said. The gain accelerated after the Energy Department said that U.S. oil supplies fell the most since September.

“The outcome, no change in OPEC quotas, was expected, but the surprise was Saudi Arabia being very explicit about a price objective for the first time since the price band mechanism in the early part of this decade,” said Lawrence Eagles, global head of commodities research at JPMorgan Chase & Co. in New York.

Crude oil for July delivery rose $1.63, or 2.6 percent, to $65.08 a barrel at 2:45 p.m. on the New York Mercantile Exchange, the highest settlement since Nov. 5. Futures are up 46 percent this year.

The Organization of Petroleum Exporting Countries sought to maintain a benchmark price, comprised of seven oil grades, between $22 and $28 a barrel beginning in 2000. The group abandoned the price band in January 2005.

“They have now set economic parameters within which the market will now function, on the upside at least,” Eagles said.

Saudi Arabia’s al-Naimi forecast that oil may rise to $75 a barrel by this year’s third or fourth quarter. The group’s next meeting will be on Sept. 9, he said. more...