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Crude oil prices soar as OPEC eases output

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NEW YORK — Crude oil prices soared almost 4 percent Tuesday after the president of OPEC said a drop in an index price the group uses to regulate supply meant the producers no longer needed to boost output.

OPEC, at the urging of Saudi Arabia, said as recently as Monday it would raise daily output by 500,000 barrels if the index stayed above $28 through the end of July. When the index fell, Ali Rodriguez, who is also Venezuela's oil minister, said that for now, an increase was no longer needed.

"They're calling the game off, I'm a bit surprised by this," said Aaron Kildow, an energy analyst at Prudential Securities in New York.

Crude oil for August delivery rose $1.11, or 3.6 percent, to $31.94 a barrel on the New York Mercantile Exchange. Oil is up 56 percent from a year ago.

In London, Brent crude oil for September settlement rose 76 cents, or 2.7 percent, to $29.32 a barrel on the International Petroleum Exchange.

According to members of the Organization of Petroleum Exporting Countries, the basket price had to stay above $28 a barrel for 20 consecutive business days starting July 1 to trigger the production increase.

"That works out quite nicely for those who can't pump any more oil," said William Brown, president of consultants W.H. Brown & Co. in New York. "They don't give up much revenue" as they would have if higher output by other producers sent prices tumbling. The floor on New York futures now "is probably $29 until September," he said.

Saudi Arabia, the world's No. 1 producer, proposed the 500,000-barrel-a-day rise on July 3 and initially threatened to pump the whole amount itself, saying that high prices might harm world economies and oil demand. Prices are up 25 percent this year even after two previous OPEC output increases.

The Saudis, who have the most spare production capacity, have since indicated they would share the 500,000 barrels with their fellow OPEC members, although only Saudi Arabia, Kuwait and the United Arab Emirates have the ability to quickly raise production.