OPEC lets output stand, good news for consumers

AP News
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Posted: Dec 22, 2009 3:52 PM

The world's biggest oil producing nations on Tuesday opted to leave production volumes unchanged, a decision that could lead to short-term stability for energy prices after a volatile year.

OPEC negotiations in Africa can have a direct impact on consumers and what they must pay to heat their homes or fill up the car.

Crude prices peaked in late October and have been edging downward since. So have retail gasoline prices and other fuels that are derived from oil.

Energy in the past year have rebounded quickly overall. The price of crude doubled after OPEC agreed to reduce output by a combined 4.2 million barrels each day in late 2008.

Yet as oil prices have climbed, some OPEC nations have begun to cheat on those production quotas, putting more oil than they had agreed to on the market to raise sorely needed revenue.

Compliance is with those quotes is believed to have dropped from 80 percent at the beginning of the year to 60 percent now. Crude prices have fallen about $10 per barrel in two months.

Sticking to the production agreement was the focus of oil ministers meeting Tuesday in Angola, and also of investors who see that OPEC compliance has been sliding.

"OPEC's decision to hold production steady is bearish because we know production is going up," PFGBest analyst Phil Flynn said.

Still, prices appear well within the comfort level for the Organization of Petroleum Exporting Countries.

It's part of the reason that retail gasoline in the U.S. has remained steady for weeks at about $2.60 per gallon.

Pump prices have been heading lower for weeks, even if gradually, and fell 0.5 cents overnight to $2.585 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service.

Heading into the holidays, consumers are paying 5.6 cents less per gallon than they did last month, perhaps a few more dollars for shopping.

Benchmark crude for February delivery rose 68 cents to settle at $74.40 on the New York Mercantile Exchange.

In other Nymex trading in January contracts, gasoline rose almost 2 cents to settle at $1.8888 per gallon and heating oil rose less than a penny to settle at $1.9486. Natural gas rose 4.6 cents to settle at $5.715 per 1,000 cubic feet.

In London, Brent crude for February delivery rose 47 cents to settle at $73.46 on the ICE Futures exchange.

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Associated Press writers Pablo Gorondi in Budapest, Alex Kennedy in Singapore and Adam Schreck in Luanda, Angola, contributed to this report.