March 15 (Bloomberg) -- Crude oil jumped to a one-year high as oil ministers from Venezuela and Qatar said OPEC will proceed with a production cut in April, even after a 15 percent rise in New York oil prices this year.

U.S. inventories fell to a 28-year low in January and remain about 3 percent below the five-year average for the time of year. Oil processing is rising as refineries make gasoline for the peak- demand warm-weather months. Economic growth is boosting petroleum demand, with the U.S. expanding in the second half of 2003 at the fastest pace since 1984.

``It's looking more and more likely that OPEC members are intent on cutting production, while demand in Asia and the U.S. looks strong,'' said Nauman Barakat, senior vice president at Refco Energy Markets in New York.

Crude oil for April delivery rose $1.25, or 3.5 percent, to settle at $37.44 a barrel on the New York Mercantile Exchange, the biggest gain since Feb. 2 and the highest close since March 12, 2003, when U.S. troops were preparing to invade Iraq.

In London, the April Brent crude-oil futures contract rose $1.56, or 4.8 percent, to $33.80 a barrel on the International Petroleum Exchange, the highest close since March 12.

``We talked with some ministers yesterday and today, and everybody's agreed to cut production in April,'' Venezuelan Energy and Mines Minister Rafael Ramirez told reporters in Cairo. ``The price now is high, but for the OPEC countries, it's a fair price.''

Ramirez and officials from four other members of the Organization of Petroleum Exporting Countries were attending a conference on natural gas.

OPEC Squeeze

At a Feb. 10 meeting OPEC members said the group would reduce production targets by 1 million barrels a day starting April 1, and cut production above existing quotas by 1.5 million barrels a day starting March 1.

OPEC's current strategy is ``squeezing the commercial stockpiles, to keep them as low it can,'' said Sheikh Zaki Yamani, the former Saudi Arabian oil minister. OPEC is trying to iron out seasonal fluctuations in inventories between winter and summer, he said. Yamani, who now heads the Centre for Global Energy Studies, was speaking at a conference in London.

``We might see a gasoline problem (in the U.S.) even if there is enough crude,'' he said. U.S. gasoline inventories are vulnerable because the country has adopted standards for gasoline that some foreign refiners can't meet.

New York, California and at least 15 other states have banned the petrochemical additive known as MTBE in cleaner- burning reformulated gasoline and shifted to an ethanol blend. Rules requiring lower sulfur content in gasoline also took effect this year in the U.S.

Gasoline Prices

U.S. motorists will pay record prices this spring and summer for fuel, the Energy Department predicted last week. The average U.S. price for regular gasoline was 1.722 a gallon on Friday, after rising 8.8 cents in the past month, according to AAA, formerly the American Automobile Association. That's 1.5 cents below the record 1.737, reached on Aug. 30, 2003.

Gasoline futures usually rise to their annual peak in the spring months as retailers boost stockpiles before the Memorial Day holiday in late May, the unofficial start of the driving season. The peak period ends with the Labor Day weekend in September.

Gasoline for April delivery rose 3.46 cents, or 3.2 percent, to settle at $1.1319 in New York. Prices reached a one-year high of $1.154 on March 1.

Gasoline demand is stronger than a year ago, according to Energy Department figures. Demand averaged 8.9 million barrels during the four weeks ended March 5, 3.7 percent higher than the same period in 2003.

``You can't help but be a little spooked when you see gasoline prices and demand so high at this time of year,'' said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons Inc. in St. Louis. With the change in regulations ``we don't have any idea how things will pan out.''

Strategic Reserve

Prices fell on Friday after the U.S. Senate voted to cancel the delivery of 53 million barrels of oil into the nation's Strategic Petroleum Reserve and sell it instead to refineries to drive down prices.

After the oil market closed, the Energy Department reiterated the administration's policy of filling the reserve and not using the oil to ``manipulate'' prices.

``We had a negative day on Friday because of the amendment to halt deliveries to the SPR,'' said Tom Bentz, an oil broker at BNP Paribas Commodity Futures Inc. in New York. ``It was an overreaction and we saw prices come back a bit at the end of the day. It doesn't look like there is much of a chance that the amendment will become law.''

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

Last Updated: March 15, 2004 15:40 EST