Oil rises as OPEC maintains production level

NEW YORK (AP) - A contentious meeting of oil ministers ended Wednesday with a clear message: Don't count on OPEC to do much about oil prices.

The 12-nation group decided not to boost production, which likely would have resulted in lower prices. That sent oil back above $100 a barrel. And more importantly, it sets the stage for higher prices later this year.

Rising energy prices since the beginning of the year have impacted the U.S. economic recovery. The Federal Reserve on Wednesday reported that the economy slowed in several parts of the country this spring and blamed high gas prices for sluggish consumer spending.

At Wednesday's OPEC meeting in Vienna, Saudi Arabia lobbied for an increase in oil output, which likely would have likely lowered oil prices. Countries like Iran resisted, arguing that oil supplies are adequate to meet demand and current prices are appropriate.

"We are unable to reach consensus," OPEC Secretary General Abdullah Al-Badri told reporters after the meeting in Vienna ended. Saudi oil minister Ali Naimi called the meeting "one of the worst ever."

Traders were surprised and oil prices climbed. Benchmark West Texas Intermediate for July delivery gained $1.65 to settle at $100.74 per barrel on the New York Mercantile Exchange. In London, Brent crude added $1.07 to settle at $117.85 per barrel on the ICE Futures exchange.

Many analysts were almost certain that OPEC would increase production. OPEC not only supplies 34 percent of the world's oil - about 29.7 million barrels per day - it has the unique ability to crank up production as needed. Other oil-producing countries, such as Canada, Russia and Mexico, don't have that flexibility.

Global oil consumption is expected to increase by 2 percent this year to an average of 88.4 million barrels per day.

The oil market has been worried for months that unrest in Libya and Yemen could destabilize larger oil-producing nations in the region. The two countries normally produce less than 4 percent of the world's oil needs. Saudi Arabia and others have boosted output to make up for much of the shortfall, but concerns remain that unrest could intensify across the region and disrupt supplies.

Oil prices jumped 25 percent from January through April as global demand grew to the highest level on record while violent uprisings in North Africa and the Middle East threatened oil fields and cut off Libya's oil exports.

The price of gasoline soared as well. The national average in the United States grew 28 percent to record levels from January through early May, nearly topping $4 per gallon. Motorists reacted by driving less. Consumer confidence suffered as more money went to the pump. Though gasoline prices have dropped 21 cents in the past month, they're still above $3.70 per gallon and analysts say they'll continue to squeeze budgets this year.

The U.S. Energy Information Administration's said this week that it expects the global thirst for oil to outpace the industry's ability to pump it by 1.81 million barrels per day between July and September. That's the largest shortfall since the final three months of 2007.

Capital Economics said OPEC would need to boost production by 1.5 million barrels per day to help keep prices in check.

Gasoline pump prices dropped another 1.3 cents on Wednesday to a national average of $3.748 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is 21.2 cents cheaper than it was a month ago, but remains $1.03 higher than the same time last year.