Oil Up Again...

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Oil rises in Asia on OPEC inaction, Norway strikes

3.39 a.m. ET (0839 GMT) June 12, 2000

SINGAPORE, June 12  (Reuters) - Oil prices gained in Asia on Monday as producing cartel the Organisation of Petroleum Exporting Countries (OPEC) delayed a plan to put more supplies in the rallying market.

New worker strikes, which have cut Norway's oil supplies from the weekend, also bolstered market sentiment.

By 0715 GMT, the New York Mercantile Exchange (NYMEX) crude market for July futures was last traded at $30.40 a barrel, up 20 cents from Friday.

The same market had settled 42 cents up in New York on Friday at $30.20 a barrel.

OPEC's latest non-interventionist stance has returned oil to near two month highs above $30, a level discomforting to both producers and consumers.

The return to strength comes after a softer tone early last week, as dealers tried to interpret whether OPEC would raise supply under its much publicised plan.

The plan, drawn up by an informal agreement early in March, allows OPEC to automatically raise output by 500,000 barrels per day (bpd) to cool prices, if on a 20-day average its basket of crudes breaks above $28 a barrel.

This average stood at $28.13 a barrel on June 8, according to Reuters' last calculations based on figures from the OPEC secretariat.

But on Sunday, OPEC Secretary-General Rilwanu Lukman said the cartel would not implement any output hike before the major producers' June 21 meeting in Vienna.

"It was always an informal plan,'' Lukman said in Canada, where he is attending a world oil industry summit.

"We are very close to the meeting and I don't see OPEC triggering anything unusual before June 21,'' he said.

OPEC President Ali Rodriguez made similar comments on Friday, saying that recent high oil prices gave a false impression that world oil supplies were tight.

OPEC kingpin Saudi Arabia told Asian term customers on Monday to expect cutbacks of 9 to 11 percent in July on its standard oil contracts, against lower cuts of six to eight percent in June.


On the backburner was a labour dispute which prompted a cut in Norway's oil supplies from the weekend.

On Saturday, some 185 Norwegian oil union workers went on a strike after pay talks with employers collapsed.

This has resulted in the closure of a 225,000 bpd Draugen oil platform operated by oil major Shell (RD.AS) (SHEL.L), and delayed work on two gas platforms.

Norway, with 3.2 million bpd exports, is a major oil exporter behind Saudi Arabia.

Norway last month scraped through its most serious labour dispute since the 1980s, which had crippled oil exports by nearly a third for around a week.

-- Deb M. (vmcclell@columbus.rr.com), June 12, 2000


It finally looks like the stuff is starting to hit the fan. Small businessess in the U.S. will start failing by the millions, unable to compete with the high cost of oil. This will start a dominoe effect, which will reach all over the globe. All because of two digits that lazy computer geeks 'overlooked'. There will be no incumbants reelected in November. Does anyone even think the Olympics will be held this summer?

-- The Fat Lady Is (starting@to.sing), June 12, 2000.

Mmmmm, Fat Lady, why do you think the Olympics won't be held? Why should millions of businesses fail this summer? And what does y2k have to do with any of it?

Sounds like someone's trolling again. With bad bait, too.

-- Cash (cash@andcarry.com), June 12, 2000.

Okay, I'll nibble at some bad bait: what makes this poster believe that the economy is going to go bad all at once? Why not the "Flood Scenario" where the water slowly, slowly rises? I'll agree that gas prices are high and if they remain at their present levels, it will affect the economy, but even in 1972, changes didn't happen overnight.

-- (kb8um8@yahoo.com), June 12, 2000.

I loved this part,

"returned oil to near two month highs above $30, a level discomforting to both producers and consumers"

What producere would be uncomfortable with higher prices? Why non-sequitors are written into articles like this just baffles me, or is it just crappy writing?

Anyways... thanks for the article. Part of my background is petroleum reservoir engineering and I expect to see energy as a driving force in the coming years.

-- Will (righthere@home.now), June 13, 2000.

Will: Regarding why producers might not like to see high prices, as I understand it they walk a fine line between getting as much as they can for a barrel of oil and pushing the price so high that they tip the global economy (read U.S.) into a recession that is bad for business. Also, they are trying to keep oil prices below a level where alternate energy sources become more attractive and profitable.

My personal reading of the situation is that some OPEC members have looked at their own economies, the Hubbert Curve futures of their competitors and major markets (esp. U.S. and Europe), and their own petrosupplies, and they've decided to bite the bullet and go for the high prices even if they do cause a recession. They want their oil to last for as long and sell for as much as possible. But that's just IMHO.

-- Cash (cash@andcarry.com), June 13, 2000.

>they've decided to bite the bullet and go for the high prices even if they do cause a recession. I agree with you there, Cash. If that's true, it's in their best interests to get as much money as possible. There are probably a few members who believe that with the US economy such as it is, $1.90+/gal can be absorbed for several months before a recession kicks in. Perhaps that's why some pundits are calling for lower gas prices in September: this is vacation time and people are willing to pay extra.

However, as I wrote on another thread, I know people who are canceling their trips in favor of either local adventures (Cedar Point, King's Island), or other projects. I won't try to say "everyone" is doing that, but that's the trend in my neighborhood. Regular gas is at $1.92 right now (ave) -- it ranged from $1.19 - $1.22 for regular last year around this time.

-- (kb8um8@yahoo.com), June 13, 2000.


Producers want stability yes, but the swing producer Arabs will consolidate their role more and more with time. Price will rule because the supply\demand curve for oil is not very elastic...yet Let's hope other technologies get a foot hold now before prices get chronically higher.

-- Will (righthere@home.now), June 14, 2000.

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