The Guardian Online

Monday, August 28, 2000 Oil near peak as importing nations cry foul

OIL markets roamed the $30 danger zone on Friday despite word of rising output from Organisations of Petroleum Exporting Countries (OPE) triggering more complaints from importing nations about rampant fuel costs.

North Sea benchmark, Brent crude, was one cent off at $31.72 a barrel while U.S light crude was nine cents stronger at $31.72.

Brent has averaged $25.98 a barrel in the 12 months to date, in excess of a $25 target sought by OPEC kingpin Saudi Arabia and almost double the $14.05 average of the previous 12 months.

Japan, a big importer of middle east oil, added its voice to complaints already made by the United States and European Union.

"Oil prices have a great impact on the Japanese economy , and it would be desirable to have them in the lower 20s, "Trade and Industry Minister, Takeo Hiranuma told reporters.

Australian Foreign Minister, Alexander Downer, told envoys to OPEC nations to convey concerns at the highest level out high oil prices, and urge the group to bring down.

"Australian consumers are forced to pay the high international prices and I am determined to use our diplomatic network to ensure that Australian concerns are being heards," Downer said in a statement.

The market has been buoyed by falls in U.S. stockpiles of crude close to 24 year lows of 279.7 million barrels roughly 19 days of supply as the Saudi dominated Organisation of the Petroleum Exporting Countries has continued to curb production.

This has raised concerns that the Northern hemisphere countries may face a shortfall of heating oil this winter.

OPEC, which controls the bulk of international traded oil, meets on September 10 to decide future output policy.

While it has signalled it will act to arrest the rally if prices stay at current levels, experts say some member countries are already pumping flat out and cannot produce more.

Meanwhile a leading tanker trucker told clients OPEC output was seen rising by 736,000 barrels a day (bpd) in August.

Geneva-based Petrologistics projected August cartel output at 29.075 million bpd from a revised 28.339 million bpd for July, with Iraq providing the lion's share of the extra output and the rest of OPEC contributing about an extra 260,000 bpd.

Ten OPEC producers with output quotas, including Saudi, were expected to lift output by about 260,000 barrels a day during august to 26.05 million. That would take the cartel 605,000 bpd in excess of official limits for the 10 of 25.4 million.

U.S. president Bill Clinton said on Wednesday oil needed to be between $20 and $25, or risk pushing oil dependent economies into a recession.

OPEC's acting Secretary-General, Shokri Ghanem, said on Thursday that OPEC did not see a shortage of crude, but blamed high prices on speculation.

Leading OPEC producers have said a sustained price above $30 would indicate a need to cool the market. U.S. officials have repeatedly said $30 is too high and $10 is too low.

Last week OPEC president Ali Rodriguez said a fledgling cartel price band mechanism would kick in if oil stays up, but activation of the trigger was likely to coincide with its September 10 meeting.

The informal mechanism calls for a 500,000 bpd increases if the price of a basket of seven crudes stays above a $22- $28 band for 20 working days. It has been above the range for nine straight days up to Thursday.

Oil markets cooled off only a little on Thursday on news that the U.S. Clinton administration may spring emergency supplies from the nation's strategic petroleum reserves.

http://www.ngrguardiannews.com/business2/bn796008.html

-- Martin Thompson (mthom1927@aol.com), August 28, 2000