Oil rises after OPEC opts for the status quo

updated 2:27 p.m. ET Dec. 22, 2009

NEW YORK - Oil prices rose after the world's biggest oil producers on Tuesday opted to leave production volumes unchanged, a decision that could mean short-term stability for energy prices after a volatile year.

By midafternoon, benchmark crude for February delivery rose $1.06 to $74.78 a barrel on the New York Mercantile Exchange after dropping earlier to $72.72. The contract fell 70 cents to settle at $73.72 a barrel on Monday.

OPEC negotiations in Africa can have a direct impact on consumers and what they must pay to heat their homes or fill up the car.

Crude prices peaked in late October and have been edging downward since. So have retail gasoline prices and other fuels that are derived from oil.

Energy in the past year have rebounded quickly overall. The price of crude doubled after OPEC agreed to reduce output by a combined 4.2 million barrels each day in late 2008.

Yet as oil prices have climbed, some OPEC nations have begun to cheat on those production quotas, putting more oil than they had agreed to on the market to raise sorely needed revenue.

Compliance is with those quotes is believed to have dropped from 80 percent at the beginning of the year to 60 percent now. Crude prices have fallen about $10 per barrel in two months.

Sticking to the production agreement was the focus of oil ministers meeting Tuesday in Angola, and also of investors who see that OPEC compliance has been sliding.

"OPEC's decision to hold production steady is bearish because we know production is going up," PFGBest analyst Phil Flynn said.

Still, prices appear well within the comfort level for the Organization of Petroleum Exporting Countries.

It's part of the reason that retail gasoline in the U.S. has remained steady for weeks at about $2.60 per gallon.

In other Nymex trading in January contracts, gasoline rose 2 cents to $1.8881 per gallon and heating oil rose less than a penny to $1.9540. Natural gas rose 2.3 cents to $5.692 per 1,000 cubic feet.

In London, Brent crude for February delivery rose 38 cents to $73.37 on the ICE Futures exchange.

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