OPEC agrees to increase production - oil prices go up

greenspun.com : LUSENET : TB2K spinoff uncensored : One Thread

OPEC agrees to increase production - oil prices go up

http://quote.bloomberg.com/fgcgi.cgi?ptitle=Bloomberg%20Energy&touch=1&T=energy_news_front.ht&s=AOVEVHhUYT1BFQyBB

-- Cave Man (caves@are.us), June 21, 2000

Answers

OPEC to raise production; oil prices soar anyway

By Bruce Stanley, Associated Press, 6/21/2000 14:11

VIENNA, Austria (AP) OPEC members agreed Wednesday to boost official crude oil production by 3 percent, Qatar's oil minister said a move unlikely to be enough to provide motorists with relief from record-high gasoline prices in the United States.

After an unusually brief 90-minute meeting Wednesday in Vienna, Qatari oil minister Abdullah bin Hamad Al Attiyah said the production increase from the Organization of Petroleum Exporting Countries will be 708,000 barrels daily. It will begin in July, according to Ali Naimi, oil minister for Saudi Arabia, the world's biggest producer.

But oil prices were rising on world markets, and analysts said they expected that the increased production limits would have little substantial impact on gas prices through the summer months.

The main U.S. crude oil, West Texas Intermediate, rose 70 cents by Wednesday afternoon on the New York Mercantile Exchange, where contracts for August delivery changed hands for $31.35 a barrel. On Tuesday, when the July contract expired, the price for oil for short-term delivery closed at a 3=-month high of $33.05 a barrel.

On the International Petroleum Exchange in London, the August contract for Brent crude from the North Sea was up 38 cents at $29.40 a barrel Wednesday afternoon.

Analysts said an increase of 700,000 barrels daily would only add an estimated 200,000 fresh barrels of crude to the market. That's because many of OPEC's 11 members are already exceeding their quotas by a total of roughly 500,000 barrels a day.

In addition, oil produced in July won't immediately reach markets in the United States because of the time it takes to ship Middle East oil.

As a result, analysts said a 3 percent increase in OPEC's output might cap current high prices for crude but would do little to ease prices for gasoline in the United States.

Roger Diwan, an analyst at The Petroleum Finance Company, a consultancy based in Washington, said an increase of 700,000 barrels a day could ''remove some of the sting'' to oil importing nations, causing U.S. oil prices, for example, to drop slightly to between $27 and $28 per barrel. As a rough rule of thumb, each $1 drop in the price of a 42-gallon barrel of oil is equivalent to a 2= cent decline in a gallon of gas.

The ministers met at a time when pressure is building in the United States for relief from sharply rising gasoline prices. The national average price of regular unleaded gas was $1.681 this week, up a nickel from the previous week, according to the Department of Energy a fourth straight week of record highs.

''I think the U.S. gas prices are going to continue to go up this summer,'' said Falah Aljibury, an industry consultant based in Alamo, Calif.

American refineries already are producing almost all the gasoline they can, and U.S. gas inventories are at their lowest levels in several years, he said. By the time ships containing fresh Middle Eastern crude reach U.S. ports, the summer driving season will be almost over.

Hopes for even greater OPEC production were tempered by the group's limited ability to pump more oil. Only Saudi Arabia, Kuwait and the United Arab Emirates have enough spare capacity to pump large amounts of new oil, said Leo Drollas, chief economist of the Center for Global Energy Studies in London.

OPEC pumps about 35 percent of the world's oil. Its official quota, not including Iraq, is 24.69 million barrels a day.

Key non-OPEC producers such as Mexico have cooperated with the cartel, agreeing in March, for example, to boost their output in line with OPEC.

Under pressure from the United States, nine OPEC members agreed in March to raise output in a successful effort to trim crude prices, which had almost tripled over the previous year.

Iran participated unofficially in that increase although it refused to sign the formal agreement out of anger at what it saw as heavy-handed U.S. intervention.

Iraq, which never was part of the production cuts last year that sent prices surging, was excluded from the March agreement. And this week, Iraq urged oil producers not to feel pressured to boost production, even as its own output has been on the rise to raise badly needed cash.

''Iraq will not accept any increase in oil production during the OPEC meeting under any pressure,'' Oil Minister Amer Mohammed Rashid was quoted as saying Wednesday in the Iraqi al-Thawra daily. Rashid sent a subordinate to the OPEC meeting.

http://www.boston.com/dailynews/173/world/OPEC_to_raise_production_oil _p:.shtml

-- Cave Man (caves@are.us), June 21, 2000.


John Baily, of the Wall Street Journal, reports from Vienna Austria, that OPEC producers will increase production by only 500,000 barrels per day. According to Baily, an increase of 3,000,000 barrels per day would be required to bring down world oil prices. Baily goes on to say that most OPEC producers can not increase their production because "they are tapped out from the standpoint of their equipment." There are only three reasons why an oil producer does not install new equipment to increase production capacity. (1) The producer does not have adequate funds to finance installation of equipment. (2) The producer can not obtain credit to finance installation of equipment. (3) The producer's remaining oil reserves are not sufficient to amortize the cost to of additional equipment. If OPEC producers were operating in the U.S., environmental regulations might constitute a fourth reason for not installing new equipment. However, OPEC producers are not constrained by U.S. environmental regulations. Take your pick as to which of these three factors is the most plausible reason for the reported equipment shortages in most OPEC nations.

http://csf.colorado.edu/longwaves/jun00/msg00357.html

-- Cave Man (caves@are.us), June 21, 2000.


WHAT A **CROCK**. FROM ANOTHER NET "CHAT GROUP" OF "WAVE THEORISTS".
OPEC HAS CAPITAL RESTRAINTS??? THEY **DEFINE** THE TERM "CAPITAL".

RESERVES?? GET REAL.

There are only three reasons why an oil producer does not install new equipment to increase production capacity. (1) The producer does not have adequate funds to finance installation of equipment. (2) The producer can not obtain credit to finance installation of equipment. (3) The producer's remaining oil reserves are not sufficient to amortize the cost to of additional equipment.

-- cpr (buytexas@swbell.net), June 21, 2000.


cpr,

The final story will be written by the price of oil itself. Remember 80% of oil produced today comes from fields discovered prior to 1973.

-- Cave Man (caves@are.us), June 21, 2000.


cpr,

Reserves and production capacity are distinct and separate terms. The bottom line is that due to deferred maintenance oil is not flowing out of the ground fast enough. Understand?

-- Cave Man (caves@are.us), June 21, 2000.



Of course our stock market continues to soar again, along with the oil prices. Figure that one out!

-- Observer (lots@to.observe), June 21, 2000.

Moderation questions? read the FAQ