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Title: Energy Panel: Oil Reserve Dwindling Summary: LONDON (AP) -- The world's richest countries have depleted their oil inventories to the lowest levels seen in four years, a widely read survey said Friday, reinforcing concerns that motorists will soon be paying even stiffer prices to fill their tanks.
Source: AP Online Date: 03/10/2000 15:01 Author(s): BRUCE STANLEY, AP Business Writer
Energy Panel: Oil Reserve Dwindling
LONDON (AP) -- The world's richest countries have depleted their oil inventories to the lowest levels seen in four years, a widely read survey said Friday, reinforcing concerns that motorists will soon be paying even stiffer prices to fill their tanks.
Pinched profit margins for oil refineries have caused a slowdown in the production of gasoline and other products, and this delay could lead to gas shortages during the peak driving season this summer, the International Energy Agency reported.
World output of oil increased in February by a slight 0.3 percent to 75 million barrels per day.
However, drastic reductions in oil inventories in the United States, Europe and Japan have created a shortfall in global petroleum supplies of about 2.5 million barrels per day, said David Knapp, editor of the IEA's monthly oil report.
This shortfall is expected to widen in the during the second half of 2000, when consumer demand historically rises, first for gas and later for home heating oil.
``We are quite concerned,'' Knapp said from his office in Paris.
For motorists, the report's implications are bleak. Americans are already paying nearly $1.50 for a gallon of gasoline, compared to prices of less than $1 last winter.
Average U.S. retail gas prices of $1.80 and even $2 per gallon are looming on the horizon, warned Roger Diwan of The Petroleum Finance Company, a consultancy based in Washington.
``You need to build stocks and you need to be able to run your refineries at a higher rate in order to meet the higher demand,'' Diwan said.
The IEA report reinforces a prediction by the U.S. Energy Department issued earlier this week that gas prices could spike at $1.75 to $1.80 this summer because production isn't keeping pace with demand.
The IEA is part of the Organization for Economic Cooperation and Development, a group of the world's wealthiest countries. Its report underscores the importance of the March 27 meeting in Venice of oil ministers of the Organization of Petroleum Exporting Countries.
OPEC is worried about the recent price volatility, and analysts now expect the group to ease some of the production cuts that it made in 1998 and 1999 to boost historically low prices.
OPEC members have refused to specify the likely size of any increase.John Toalster of SG Securities in London predicted a ``fairly cautious'' addition of a maximum 1.5 million barrels per day.
The likelihood that OPEC would boost output improved this week when Iran, one of the group's staunchest price hawks, appeared to express support for increased production.
However, analysts suggested that OPEC is not likely to pump enough barrels for importers to meet current demand while also replenishing oil inventories.
The IEA noted that inventories in rich countries have slipped to their lowest level since the early spring of 1996. Heavy consumption should ease somewhat in the second quarter, but demand will pick up again toward summer, it said.
These factors have contributed to volatile oil prices.
Crude has surged from $10.72 a barrel on Dec. 10, 1998, reaching a 9-year high of $34.20 during intraday trading Tuesday on the New York Mercantile Exchange. At late afternoon in New York, light sweet crude for April delivery was trading at $31.67 per barrel, down 2 cents.
Heating oil prices doubled in some parts of the northeastern United States this winter, and U.S. gasoline prices have neared $1.50 a gallon.
In London, a contract of North Sea Brent crude for April delivery was trading at $29 per barrel on the International Petroleum Exchange, down 29 cents from Thursday's close.
OPEC boosted production last month by 540,000 barrels per day, with Iraq and Nigeria accounting for much of the increase, the IEA said. OPEC was 74 percent compliant with its output cuts in February, down slightly from a revised compliance rate for January of 78 percent.
However, the IEA warned that several OPEC members, including Venezuela -- the group's No. 3 producer -- are already at or near their production limits. The report blamed the lack of spare capacity on a dearth of investment in new equipment during 1998, when oil prices and revenues were much lower.
The impact of the report, said Peter Gignoux, head of the petroleum desk at Salomon Smith Barney in London, was to fire ``warning shots all over the place.'' On the Net: The International Energy Agency's site at http://www.iea.org.
Copyright ) 2000 Associated Press Information Services, all rights reserved.
-- (Dee360Degree@aol.com), March 10, 2000