05/09/2000 13:52 - (SA) Oil hits fresh peak Michael Georgy

London - Oil prices pushed to fresh 10-year highs on Tuesday amid fears that an expected Opec supply hike may prove impotent against an overheated market.

International benchmark Brent crude futures for October posted a fresh decade-peak of $32.88 a barrel before slipping to $32.65 for a 19 cent loss on the day.

Brent, which has now spent most of the last month above the $30 danger point cited as unacceptably high by the United States, hit an earlier 10-year peak of $32.85 on Monday.

US light crude futures rang another alarm bell by vaulting above $34 for the first time since March when prices were at their highest since early 1991. They later slipped to $33.97 for a gain of 59 cents.

Traders are increasingly fearful that Opec's expected 500 000 barrel per day (bpd) output hike at a September 10 Vienna meeting could have no impact on the market.

Traders say the Organisation of the Petroleum Exporting Countries will have to pump more than that amount to contain prices, which have largely ignored two previous supply increases.

They worry that such an increase will not be sufficient to avoid a heating oil shortage in the United States this winter.

"There is a clear message to Opec here -- 500 000 barrels (per day) is not enough," said brokers GNI in their daily Energy Report, reflecting a widespread market view.

The irony is that even if Opec pumps more crude, it will make little sense for refiners to buy and store it because under the market's current price structure they would eventually have to sell it on at a loss.

SAUDI ARABIA HOLDS THE KEY

The Saudi-owned pan-Arab al-Hayat newspaper quoted on Tuesday an unidentified Opec source as saying Opec states must take a decision at their meeting to increase production by 700 000 bpd to help calm the oil market.

But traders are brushing aside Opec comments as cartel ministers again attempt to contain prices.

Opec kingpin Saudi Arabia, the world's largest oil exporter, vowed last week to lift supplies by a "suitable" amount to lower prices and an Opec delegate said on Thursday the Saudis could push in Vienna for more than the expected 500 000 bpd.

Saudi Arabia and its key Western ally the United States - the world's biggest oil consumer - want oil prices around $25 a barrel.

The kingdom's plans may become clearer when Saudi Crown Prince addresses the United Nations Millennium Summit on Wednesday. He is expected to tell world leaders that his country will work for stable oil prices.

He is also due to meet US President Bill Clinton to discuss ways to knock down oil prices, which have become an explosive issue during a US election year.

High prices, meanwhile, are taking their toll on everything from airlines to trucking. In Asia, higher imported oil costs means a larger foreign currency pay out.

That translates into mounting pressure on Opec to open up the oil taps, a task that would fall mostly in the hands of Saudi Arabia, which has the vast majority of the producer groups' spare output capacity.

http://news.24.com/News24/Finance/Markets/0,1466,2-8-21_907104,00.html

-- Martin Thompson (mthom1927@aol.com), September 05, 2000