Oil prices surge on doubts OPEC will boost production

LONDON - Oil prices surged to three-month highs on world oil markets Tuesday on doubts that OPEC will raise production at a meeting next week.

Light, sweet crude for July delivery jumped 91 cents by Tuesday afternoon on the New York Mercantile Exchange to $32.65 a barrel and traded as high as $32.73 during the day. The last time crude was higher on the Nymex was March 8. On the International Petroleum Exchange in London, Brent crude oil for July delivery climbed 29 cents to $31.50 a barrel in afternoon trading, after rising to a three-month high of $31.70 during the session.

Higher prices were spurred by the belief that OPEC will not increase production levels at its June 21 meeting, analysts said.

The Organization of the Petroleum Exporting Countries had been expected to increase supply by 500,000 barrels a day last week - as ministers agreed at their last meeting if the average 20-day price of OPEC oil topped $28 a barrel. OPEC said Tuesday that its benchmark, based on a combination of prices, rose to $28.23 a barrel in the week of June 8 from $22.22 the previous week.

White House spokesman Joe Lockhart said Tuesday that the United States was continuing diplomatic discussions to try to ease prices and remained hopeful that OPEC nations would respond favorably.

''We'll see where they go next week when they meet,'' Lockhart said. ''We certainly have seen a spike up in price at the gas pump. The prices have gone to a level that are too high. At these levels, you run the risk of reducing the demand so that it could potentially be too high for consuming countries and also producing countries.''

Iran's oil minister, Bijan Namdar Zangeneh, reiterated Tuesday that his nation opposed a production increase, according to Tehran radio. Iran did not sign the previous agreement, but did boost production to preserve its market share. It remains opposed to higher production.

''It is not really necessary to increase production until the price-band mechanism is evaluated,'' Zangeneh said. ''Any increase in (OPEC) production will intensify stockpiling, and that will jeopardize oil prices and oil market conditions in the future.''

Casting further doubt on a production hike, Venezuelan President Hugo Chavez said Monday that current oil prices are ''fair and just.''

''We should maintain prices around this level of $28 a barrel,'' Chavez told reporters in Caracas.

OPEC President Ali Rodriguez, who also is Venezuela's oil minister, said Tuesday in Caracas that any decision on production levels would be made at the June 21 meeting in Vienna, Austria. Rodriguez said he expects oil markets to cool down after that meeting.

Indonesia's energy minister, Soesilo Bambang Yudhoyono, said Tuesday in Jakarta that there is no need to rush to raise production.

In comments to reporters, Yudhoyono said the Secretary General of the Organization of Petroleum Exporting Countries, Rilwanu Lukman, had informed him that prices haven't yet been high enough for long enough to merit a production hike.

''Because of that, Indonesia is not in a hurry to change the output,'' he added.