Crude rose, reversing earlier losses, amid speculation the Organization of Petroleum Exporting Countries may reduce supply in response to slowing demand. Futures gained as much as 0.3 percent in New York. The International Energy Agency on May 12 trimmed its 2011 global oil demand forecast for the first time as this year’s price rally begins to weigh on consumers. There is a 65 percent chance OPEC will raise its production quota to lessen the risk high prices will curb demand, Societe Generale SA said in a report. “The current data coming out suggest a fall off in economic activity and a decrease in demand,” said Alexander Ridgers, head of commodities at CMC Markets in London. “If this happens OPEC will tighten their supply.” Crude for July delivery rose as much as 29 cents to $99.30 a barrel in electronic trading on the New York Mercantile Exchange and was at $99.14 at 10:33 a.m. London time. Prices are up 39 percent the past year. Brent crude for July delivery was at $114.78 a barrel, up 30 cents, on the London-based ICE Futures Europe exchange. OPEC may raise output quotas by 1.5 million barrels a day versus actual production when it meets tomorrow, said Societe Generale analysts led by Michael Wittner in New York. “This meeting result is not a slam dunk, though, with a 65 percent probability and a medium level of conviction,” the report said. Supply Cuts The producer group announced its biggest-ever supply cuts in late 2008 amid a collapse in global demand, capping production at 24.845 million barrels a day for all members except Iraq, which is exempt from the quota system. Its compliance rate with those limits was 69 percent in April, OPEC said in its monthly report on May 12. “OPEC will increase quotas slightly to bring them closer to actual production,” said Axel Herlinghaus, Frankfurt-based senior commodities analyst at DZ Bank AG, which trades crude in New York and London. “The quotas are irrelevant at the moment.” The group won’t announce a supply increase and will keep its formal output quota unchanged for an eighth consecutive meeting at the June 8 gathering, according to a Bloomberg survey of analysts. Venezuelan Oil Minister Rafael Ramirez also said the group is unlikely to raise production. The 11 OPEC members bound by the output quotas produced 26.2 million barrels a day in May, or about 1.4 million barrels more than they pledged, according to a Bloomberg News survey of analysts, producers and oil companies. Total supply including Iraq was 28.9 million barrels a day last month. Welcome Increase The global crude market would “welcome” increased oil production from OPEC, Vitol Group Chief Executive Officer Ian Taylor said. Brent has advanced 21 percent this year as unrest in the Middle East and North Africa toppled leaders in Tunisia and Egypt and spread to Libya. The fighting in Libya has removed about 1.5 million barrels a day of output from market. The European benchmark contract traded at a premium of $15.61 a barrel to U.S. futures today. The difference between front-month contracts in London and New York reached a record $19.54 on Feb. 21. It averaged 76 cents last year. A report from the U.S. Energy Department tomorrow may show U.S. gasoline stockpiles climbed by 1 million barrels last week from 212.3 million, according to a Bloomberg News survey of analysts. Crude inventories probably dropped 1.5 million barrels, the survey shows. Options traders increased bets that oil prices will fall further. The most-active option yesterday was the July $95 put, which rose 17 cents to 79 cents. The second-most active contract was the August $90 put, which climbed 13 cents to $1.05. To contact the reporter on this story: Rachel Graham in London rgraham13@bloomberg.net To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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