LONDON - Oil prices ticked higher on Friday but producers' hopes that the market might break free of the shackles holding it at lowly levels were again disappointed. London futures for benchmark north sea brent settled 22 cents firmer at $14.69 a barrel. Dealers said the chance of further output cuts from oil producers had receded after Mexican Oil Minister Luis Tellez said on Thursday that he was satisfied the market was on the mend.

Given the conditions in the market ... I repeat categorically, Mexico is not going to make any further cuts, said Tellez. Mexico is a contributor to the 1.5 million barrels per day (bpd) of reductions which have helped drag oil prices back from the nine-year lows of early March. Heavy inventories in key Western markets have kept a lid on the gains and despite output cuts many analysts believe supplies are still too large.

Westbound oil in transit from the Middle East is currently thirty million barrels up on the year ago level, said oil movements. Speculation has risen and fallen again that the architects of the Riyadh pact which organized the output cuts Mexico, Saudi Arabia and Venezuela might meet again soon. Although the producers would prefer prices much nearer last year's $19.30 average for brent at current market levels they do not appear prepared to take further output action.

Dealers will now concentrate on today's conference in Damascus, Syria of oil ministers from the organization of the Arab petroleum exporting countries. Saudi Oil Minister Ali al-Naimi will attend the talks along with OPEC President Obeid bin-Nasseri from the UAE and Qatari Oil Minister Abdullah al-Attiyah. Traders scrutinising OPEC output figures to see if producers are living up to their promises have found about 70 percent compliance so far with the 1.25 million bpd of cuts pledged by cartel members.

A Reuters survey found OPEC output in April down 620,000 bpd at 28.20 million. (Reuter)