The oil market has stopped taking its cues from stocks and the dollar for the moment to focus on what's being said in Vienna ahead of Thursday's OPEC meeting.
It's no surprise that the usual suspects are out with bullish comments. Saudi Oil Minister Ali Al-Naimi and Venezuelan Oil Minister Rafael Ramirez said oil prices could hit $75 a barrel by the end of the year, OPEC Secretary General Abdullah Al-Badri said oil could be closer to $70 a barrel by then.
So oil starting marching toward that number today, posting a new 2009 high for the year. NYMEX crude futures, which have risen more than 40 percent this year, settled at $63.45/barrel, the highest price since November 5, 2008. As one floor trader told me, "If they keep saying it enough—'we're going to $75, we're going to $75'—maybe we'll get there."
A few analysts have argued that the price rise is a sign that OPEC production cuts are working. The group has already reduced output by about 80 percent of the 4.2 million barrels they've promised to cut since last September.
But OPEC Secretary General Al-Badri admitted today oil prices have been rising on sentiment, not on fundamentals. (ExxonMobil CEO Rex Tillerson underscored that point in speaking to reporters after their annual shareholders meeting in Texas, saying that the recent oil price jump is due to anticipation of a recover, but it's "too early to call" the economy.) Still, while OPEC ministers acknowledge that it's momentum more than a material change in supply and demand that's sent oil prices over $60 a barrel, they're arguing prices need to be even higher to spur future energy investment.
Some OPEC countries may be able to live with oil prices at $80 or higher, but analysts I talk to think oil prices at that level will pose a serious risk to the U.S. economy and the economies of other developing nations. Oil at $70-80 dollars a barrel means prices at the gas pump could top $3 a gallon or more. Yes, that's far less than the record price set last year. But now we're seeing many more Americans out of work, being furloughed or taking pay cuts. So the fact that regular unleaded gasoline is $1.50/gallon cheaper than a year ago doesn't matter as much to many consumers as the fact that pump prices have shot up nearly 40 cents in a month.
So now we'll see what happens to oil prices when OPEC ministers stop talking to the media and talk to one another behind closed doors. No one expects the group to change their current quotas, but the public communiqué that results from this meeting could give us a good indication of how OPEC intends to manage the oil market in the short- to medium-term while demand remains weak.
I look forward to talking more about OPEC and the price of crude as well as the impact alternative energy is having on demand and energy prices in a CNBC Special Report: "Breaking the Oil Addiction" that airs tonight at 8 p.m. ET. I hope you'll tune in.