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OPEC hike may provide scant relief
Tuesday, June 20, 2000
LONDON - Under pressure from the United States and other oil importers, OPEC ministers are expected to agree this week to boost petroleum output by at least 500,000 barrels a day, or by 2 percent.
But analysts warned Monday that such an increase wouldn't lead to cheaper prices at the pump for American motorists any time soon.
"No matter what OPEC decides, it's going to be a tough gasoline season in the U.S.," said Peter Gignoux, head of the petroleum desk at Salomon Smith Barney in London.
Oil ministers from the Organization of Petroleum Exporting Countries meet Wednesday in Vienna, Austria, to decide whether to increase supplies to consumer nations that are paying more than $30 for a barrel of crude. OPEC pumps about 35 percent of the world's oil.
Prices of the main U.S. crude blend shot above $33 a barrel last week but began easing off ahead of the meeting as traders anticipated an increase in OPEC output.
July contracts for West Texas Intermediate, the U.S. benchmark crude, fell 64 cents a barrel to close at $31.69 in trading Monday on the New York Mercantile Exchange.
Contracts for August delivery of North Sea Brent crude slipped 37 cents to $27.98 per barrel on the International Petroleum Exchange in London.
A Nigerian delegate speaking Monday in Vienna said that OPEC members have accepted the need to boost output starting July 1. Indonesian officials said last week that OPEC would raise production by 500,000 or more barrels a day.
"There is absolutely, definitely going to be an increase," said Richard Savage, an analyst at SG Securities in London.
But before OPEC decides on any increase, it must reconcile conflicting data about whether the world actually needs more oil.
On one hand, some OPEC members have argued that the supply and demand for crude are in balance and that an increase in output isn't justified.
The International Energy Agency seemed to reinforce their case, claiming earlier this month that oil inventories for the world's wealthiest countries grew by a robust 1.75 million barrels a day in April and that global crude output rose sharply in May.
"Fundamentally, there's not a shortness in crude supply," Savage said.
A complicating factor is a labor dispute that threatens to shut down oil production as of midnight Friday in Norway, which is not a member of OPEC but is the world's second-largest oil producer after Saudi Arabia.
Yet soaring U.S. gasoline prices - together with temporary regional shortages caused by pipeline problems in the central United States - have fed the short-term demand for crude. The United States is the world's biggest oil market.
Any increase in oil output is unlikely to have an immediate impact on U.S. gas prices, as crude shipped from the Middle East takes 45 days to arrive in America.
-- Cave Man (email@example.com), June 20, 2000
The more important indicator this year is low stocks
-- Cave Man (firstname.lastname@example.org), June 20, 2000.
2% = 500,000 barrels per day.
That means OPEC puts out on average 25,000,000 barrels per day total? At ~50 gal/ barrel that's 1,250,000,000 *gallons/day? Man, that's a *lot* of oil.
I mean a LOT of oil,
-- Someone (ChimingIn@twocents.cam), June 20, 2000.