Crude oil rose after OPEC Secretary- General Abdalla el-Badri said ministers were unable to reach a decision on production quotas at their meeting in Vienna today. Futures increased as much as 2.1 percent after Mohammad Aliabadi, the acting Iranian oil minister and current OPEC president, said the group will maintain current output for now. A Gulf delegate said yesterday that the Organization of Petroleum Exporting Countries was going to raise quotas. A U.S. government report showed a bigger-than-forecast supply drop. “It was expected that they would raise the quotas, so this comes as a bit of a shock,” said Rick Mueller, a principal with ESAI Energy, LLC in Wakefield, Massachusetts. Crude oil for July delivery rose $1.46, or 1.5 percent, to $100.55 a barrel at 11:14 a.m. on the New York Mercantile Exchange. Prices are up 40 percent in the past year. Brent crude oil for July delivery climbed $1.07, or 0.9 percent, to $117.85 a barrel on the London-based ICE Futures Europe exchange. Saudi Arabian Oil Minister Ali Al-Naimi, representing OPEC’s biggest producer, said his country is ready to supply whatever the market needs. “It was one of the worst meetings we’ve ever had,” al- Naimi told reporters. “We were unable to reach an agreement.” Six members didn’t agree to increase quotas, al-Naimi said, adding that Saudi Arabia and three other Gulf Cooperation Council nations were ready to supply more oil to the market. The four GCC countries proposed a 1.5 million-barrel-a-day increase from the current 28.8 million. That would have meant an increase in output to 30.3 million barrels a day, he said. More Barrels “More oil is going to quietly come out of the Gulf,” Mueller said. “Saudi Arabia, Kuwait and the UAE are probably going to bring more oil onto the market. They are concerned about rising demand in the third and fourth quarters and don’t want to see the market starved and see prices rise to such a high level that they hurt economic growth.” Global oil demand will climb to 89.18 million barrels a day during the third quarter, the highest level of 2011, the U.S. Energy Department said yesterday in its monthly Short-Term Energy Outlook. OPEC’s failure to agree to increase quotas shows that some of the group’s members have limited spare capacity that would allow them to raise output, JPMorgan Chase & Co. said. It will be a “stretch” for Saudi Arabia to add on its own the 1.9 million barrels a day of production needed to meet the 30.87 million demand OPEC forecasts for its oil in the third quarter, JPMorgan analysts including Lawrence Eagles wrote in a note today. The bank reiterated its forecast that oil will reach $130 a barrel this year. ‘Knee-Jerk Reaction’ “The knee-jerk reaction to the OPEC news is probably a little overdone,” said Carl Larry, director of energy derivatives and research with Blue Ocean Brokerage LLC in New York. “It does show that there’s dissension among the members. We’re trading more on the political implications of the meeting than any changes in physical oil supply.” OPEC’s failure to reach a decision on targets shows Iran has increased its stature within the group, according to Petromatrix GmbH. Iran has replaced Saudi Arabia as the most influential member, Olivier Jakob, managing director of the Geneva-based research group, said today in an interview. Oil in New York has traded between $95.02 and $104.60 since May 9. “The bottom line is that we’re still in a $95-to-$105 range,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “Everything that happens within the range is just noise. We’ll need a crisis to get above $105, and the failure of OPEC to come to an agreement is not a crisis.” U.S. Inventories U.S. crude oil stockpiles fell 4.85 million barrels to 369 million in the week ended June 3, the biggest decline this year, according to the Energy Department. A 1.38 million-barrel inventory drop was forecast, according to the median of responses in a Bloomberg News survey of 14 analysts. Supplies of oil at Cushing, Oklahoma, the delivery point for the New York-traded West Texas Intermediate grade, fell 1.02 million barrels to 38.9 million last week, the lowest level since February, the report showed. The department’s supply report was released at 10:30 a.m. in Washington. To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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