UPI Energy Watch

Crude oil prices stabilize above $40

After falling more than 10 percent Monday, global oil prices increased and then held above $40 per barrel in the middle of the week.

Production cuts by the Organization of Petroleum Exporting Countries and the hope that stimulus packages in China and the United States will finally increase demand for oil are some of the reasons analysts point to for the slight increase in oil prices, India's Commodity Online reports.

OPEC leaders have been talking about implementing their third and largest cut in oil production at their upcoming March 15 meeting as a way of increasing oil prices.

OPEC's oil production was about 27.78 million barrels per day in February, down 770,000 bpd from January.

In the United States, the Energy Department's oil inventories continue to increase while demand decreases because of the economic downturn.

Venezuela cuts spending on oil

Amidst the ailing economy, Venezuela's government has said it will cut spending on state-owned oil company, Petroleos de Venezuela SA.

Energy Minister Rafael Ramirez suggested spending needs to be decreased as oil prices fall and said the excessive spending that took place when oil prices were nearing $150 per barrel must end, the Latin American Herald Tribune reports.

"We have to adjust to a situation that does not allow for waste, spending that is not a priority," Ramirez said. "It's clear that we can't have the same level of spending as last year."

However, while spending will be reduced year over year, plans for $125 billion in investments and development are still in place because of the savings Petroleos was able to maintain when oil was expensive, Ramirez said. The $125 billion will be spent through 2013.

Venezuela is a member of OPEC and has led the drive for cutting production to boost oil prices.

On Jan. 1 Venezuela cut its production by 189,000 barrels per day and before that had cut production by 175,000 bpd.

Pemex makes new oil discovery

Mexico's state-owned oil firm, Pemex, announced it has discovered oil at its Tsimin-1 wildcat well in the Gulf of Mexico.

On its initial production, the well produced 4,400 barrels of oil, the Oil and Gas Journal reports.

The company had budgeted more than $12.2 billion for oil and gas exploration through 2012.

Production has also started at its Cali-1 natural gas well, with initial production at 9.1 million cubic feet of gas per day.

The company said it discovered more oil and gas in 2008 than in 2007 and is on track to make a record number of new finds in 2009.

"It was a very good year in general terms and very important with respect to the previous year," said Jesus Reyes Heroles, Pemex chief executive.

Last month, in an effort to increase production, Pemex Exploration and Production contracted with J. Ray McDermott, based in Houston, to transport and install two new drilling platforms in the Gulf of Mexico.

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Closing oil prices, March 5, 3 p.m., London

Brent Crude oil: $44.99

West Texas Intermediate crude oil: $44.31

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(e-mail: energy@upi.com)