Crude prices shot up Friday following a tentative OPEC deal to end a bitter dispute over production between Iran and Iraq and reduce the cartel's output. Analysts were skeptical the pact would last.
OPEC ministers predicted oil prices would jump to $18 a barrel if the accord is signed. Prices have been at least $4 lower in recent months.Analysts said they did not believe OPEC members could restrain production for more than a few months, if at all.
A rise to $18 a barrel theoretically could add up to 10 cents to the price of a gallon of gasoline, but analysts said they doubted that would happen because retail prices did not fall during the recent slump in crude prices.
The tentative deal worked out by the ministers of the 13-nation Organization of Petroleum Exporting Countries to limit their production next year was announced late Thursday.
Iran's oil minister, Gholamreza Aghazadeh, flew to Tehran Friday to get his government's approval for the pact, which sets a ceiling on OPEC's production at 18.5 million barrels a day in the first half of 1989.
Analysts estimate OPEC has been producing more than 21 million barrels a day recently, far above the cartel's current cap of about 15 million barrels.
Issam Abdul Raheem Chalabi, the Iraqi minister, also expressed confidence the agreement would push crude prices back to OPEC's benchmark of $18 a barrel. Prices have been at least $4 lower in recent months. "I think we can reach that ($18 price) within a few months," Chalabi said.
But analysts remained skeptical that an accord would lead to $18 oil in the near future.
"If they have an agreement, the market will take it as a good deal and prices will go up," said Cyrus Tahmassebi, an economist for Ashland Oil Inc. "But once the realities of the market hit, prices will come down again, and sharply."
Tahmassebi said among the realities are that the market needs only about 17 million barrels a day of oil from OPEC, well below the 18.5 million cap the cartel proposed.
In London, futures prices rose between $1.55 and $1.65 a barrel for Brent crude, the benchmark grade for North Sea oil. Analysts said they did not expect prices to go much higher before coming down again in the weeks ahead.
Oil trading in the United States was closed for the Thanksgiving holiday.
Analysts say each $1 rise in the price of a barrel of oil theoretically adds 2.5 cents a gallon in retail gas prices.
The ministers opened their winter meeting Monday but postponed further discussions until Saturday to give them time to end the stalemate between Iran and Iraq, which agreed to a cease-fire in August in their eight-year war.