CRUDE oil futures settled higher yesterday, as OPEC signaled that there would be no output boost this summer.
Light, sweet crude for June delivery settled 76 US cents, or 0.6 percent, higher at US$127.05 a barrel on the New York Mercantile Exchange. July Brent crude on the ICE futures exchange closed up 7 US cents at US$125.06 a barrel.
Futures ended higher after Organization of Petroleum Exporting Countries President Chakib Khelil said the group will not change production levels before its September meeting. Saudi Arabia increased production by 300,000 barrels a day earlier this month, but energy markets ignored the bump, and Western leaders continue to call for greater exports.
Volume for July futures outstripped the front-month June contract, which expires at the end of trading on Tuesday. But it was contracts even further out that saw the greatest gains, with certain contracts ranging from December 2008 to December 2016 rising by US$1 or more in light volume.
When outer-month contracts gain on the front month, it often signals that traders are not concerned with the near-term supply, and that oil prices are poised to drop. That doesn't appear to be the case this time - quite the opposite, market participants said.
"The whole curve is narrowing," said Tom Bentz, a broker and analyst with BNP Paribas in New York. "Traders believe high prices are here to stay for a while.
Energy markets have shifted recently, from a focus on the strength of the dollar to giving greater weight to the balance between world oil supplies and demand. Oil prices rose over the last two weeks as diesel demand in Europe and Asia pressured global supplies, sending Nymex heating oil futures soaring. Heating oil weighed on oil prices for much of Monday's session, settling down 2.77 US cents, or 0.8 percent, at US$3.6751 a gallon.
"At this point, a lot of commodities' strength has to do with investor flows, and performance-chasing," with more and more trading firms convinced that trouble in the U.S. economy will not cause global demand for oil to slacken, John Hardy, an analyst at Saxo Bank in London, told Dow Jones Newswires.
In other Nymex trading, front-month June gasoline futures settled 1.31 US cents, or 0.4 percent, higher at US$3.2366 a gallon.