Worldwide Opec poised to raise output as oil price tests $30 a barrel Source: The Independent - London Publication date: 2000-06-02

THE OIL price surged back towards the key $30 mark yesterday as rumours that Opec, the producers' cartel, was planning a hike in production proved premature. Crude rose more than 2 per cent in London, all but wiping out Wednesday's sharp drop. Brent crude for delivery in July rose 59c to $28.90 a barrel on the International Petroleum Exchange.

The rise boosted the likelihood of an automatic increase in output through a system put in place by Opec in March when it agreed to raise output to ease the oil price down its nine-year highs.

Output will be raised by 500,000 barrels a day if a basket of seven crude prices hits $28 on a 20-day average. As of Wednesday the index was at $27.32 and could be triggered as soon as next week.

Lawrence Eagles, head of commodity research at analysts GNI, said dealers were worried the cartel would see this as enough. "The concern in the market is that if that is triggered there won't be any more coming out of Opec. The worry for people is that Opec are happy with a price around today's levels rather than below $25, which is a distinct contrast to the March meeting."

Wednesday's fall was sparked by reports that Opec ministers were planning to agree an extra increase in output at their meeting on 21 June. But yesterday Iran said it opposed a relaxation, a stance it claimed was supported by Venezuela and Saudi Arabia.

Concern over rising prices was fuelled by a report highlighting a shortage in stocks of a cleaner-burning gasoline that must by law be available in a third of United States cities.

The American Petroleum Institute said inventories of reformulated gasoline (RFG) were down 9 per cent on the year. The shortages could feed through to higher prices at the petrol pumps - something that will alarm the US Federal Reserve's interest rate committee.

Bill Richardson, the US energy secretary, yesterday declined to comment on the speculation, saying only that he hoped Opec "kept an open mind" when it meets in Vienna.

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-- Martin Thompson (mthom1927@aol.com), June 02, 2000