Oil hovers above $73 in European trading ahead of OPEC meet Tuesday, no output change expected

Oil hovers above $73 ahead of OPEC meeting

Oil prices hovered above $73 a barrel Monday ahead of an OPEC meeting where investors expect the cartel to keep production levels unchanged.

By mid-afternoon in Europe, benchmark crude for January delivery was up 14 cents to $73.50 in electronic trading on the New York Mercantile Exchange. The January contract, which expires later on Monday, rose 71 cents to settle at $73.36 on Friday.

Traders also have begun to watch the February contract, which was up 43 cents to $74.85 on Monday.

Leaders of the Organization of Petroleum Exporting Countries reiterated Monday that the group doesn’t plan to change output levels at its meeting Tuesday in Luanda, Angola,

OPEC Secretary General Abdalla Salem El-Badri of Libya said there is consensus within the oil-producing bloc to maintain its production targets into 2010, indicating the group plans to hold output steady.

“There is a consensus that there is no change,” el-Badri told reporters when asked about OPEC’s output plans at the upcoming meeting in Luanda. Even for next year, he said, changes to output are “not on our radar at this time.”

El-Badri said prices are “very comfortable” for now, reflecting a sentiment sounded by several of the group’s oil ministers in recent weeks.

Crude prices have staged an incredible turnaround in the past year, more than doubling from a low near $35 a barrel to trade to a zone many producing countries say they’re happy with.

“The market would be surprised if there was any change to output,” said Clarence Chu, a trader with Hudson Capital Energy in Singapore. “At near $75, the price is high enough to fund governments and investment, but not so high it damages the global economic recovery.”

Iraq took back a remote oil well from Iranian forces over the weekend, a confrontation that briefly sent oil prices higher Friday on investor concerns about a wider conflict, although analysts quickly excluded a lasting impact on the market.

“There are continued issues on the exact positioning of the Iranian-Iraqi border but there will not be a new Iraq-Iran war,” said Olivier Jakob of Petromatrix in Switzerland. “While it does create some nice headlines in a holiday market, the market reaction on Friday shows the risk of buying oil on such hyped headlines.”

A slight recovery of the euro against the dollar also helped oil prices, as crude valued in dollars becomes cheaper for investors holding other currencies when the greenback weakens.

On Monday, the euro was up to $1.4345 from $1.4329 in New York on Friday.

“In a holiday environment of low liquidity for commodity markets, we will this week mainly focus on the dollar,” Jakob said.

In other Nymex trading in January contracts, heating oil advanced 2.23 cents to $1.9790 while gasoline rose 0.84 cent to $1.9032. Natural gas gained 2.4 cents to $5.806 per 1,000 cubic feet.

“The weather has been cold and the U.S. East Coast has seen some of the highest snowfalls since 2003, but … there are enough stocks of distillates and refining spare capacity to answer any surge of demand without necessarily creating any imbalances,” Jakob said.

In London, Brent crude for February delivery rose 58 cents to $74.33 on the ICE Futures exchange.

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