Oil Rebounds as OPEC Keeps Supply Levels Steady

Oil prices rebounded from an early retreat Monday, as traders brushed aside OPEC supply-side issues and focused on higher stock prices.

President of the OPEC conference and Minister of Petroleum Jose Maria Botelho de Vasconcelos from...

President of the OPEC conference and Minister of Petroleum Jose Maria Botelho de Vasconcelos from Angola speaks at a news conference following a meeting of the ministers of the Organization of Petroleum Exporting Countries at its headquarters in Vienna, Austria, on Sunday, March 15, 2009. OPEC oil ministers say they will stick to present output levels but seek to end overproduction by some members. The decision Sunday means there will be no cutbacks from production levels established in December. It also translates into pressure on members of the 12-nation producer group who are exporting more oil than their quotas call for. (AP Photo / Ronald Zak)

(AP)

Benchmark crude for April delivery gained $1.10 to settle at $47.35 a barrel on the New York Mercantile Exchange. Prices fell as low as $43.62 overnight after OPEC decided to forgo further production cuts in favor of boosting compliance with existing ones.

Oil climbed into positive territory by midday Monday on the coattails of the Dow Jones industrials, which gained about 100 points. The S&P 500 index also gained ground.

Jim Ritterbusch, president of energy consulting group Ritterbusch and Associates, said OPEC's willingness to hold the line on supply is forcing traders to shift their focus to the demand side, and, at least for a day, the signs are good.

"It's just a feel-good thing that people are looking at and saying, 'Hey, this economy still has a chance to recover during the second half of this year, and if that happens oil demand's going to improve,'" Ritterbusch said.

Members of the Organization of Petroleum Exporting Countries said Sunday they will try to stick more closely to the group's current output quotas but will not make further cuts.

Phil Flynn, an analyst at Alaron Trading Corp., said de-facto OPEC leader Saudi Arabia recognizes that when people aren't buying the oil that's already being pumped, production cuts don't matter.

"I think they're starting to realize that they have to stimulate this economy with lower prices before they can get the long-term demand growth that they're looking for," Flynn said. "They've got to get back in step with the rest of the world that is trying to stimulate the economy as opposed to trying to slow it down by raising prices."

Oil prices rose from less than $35 a barrel last month as investors anticipated the cartel would cut production by up to 1 million barrels a day on top of 4.2 million barrels of reductions announced since September.