Oil leaps to 10 year high near $35/BBL

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Wednesday September 6, 3:36 pm Eastern Time

U.S. oil leaps to 10-year high near $35 as OPEC meet looms

By Timothy Gardner

NEW YORK, Sept 6 (Reuters) - U.S. crude oil hit its highest mark in a decade on Wednesday on fears that the Organisation of the Petroleum Exporting Countries (OPEC)'s meeting this Sunday would not raise production enough to tame torrid prices.

Benchmark West Texas intermediate crude oil futures on the New York Mercantile Exchange (NYMEX) came within a whisker of the $35 mark, closing at a peak of $34.95 a barrel, up $1.12 and its highest level since November, 1990.

The new decade-record price came just days before OPEC's September 10 meeting in Vienna where the cartel will decide how much it will boost production to temper oil prices.

Prices forged higher even though oil superpower Saudi Arabia confirmed that the kingdom has been leaking an extra 600,000 barrels per day, or seven percent, above OPEC production quotas agreed to earlier in the summer.

``We have increased production 600,000 barrels a day since July,'' al-Naimi said in New York. ``There is absolutely no problem putting additional crude oil into the market.''

Yet Naimi's comments did nothing to ease the high prices worrying industrial powers like the United States and the European Union, who are calling for producers to put more oil on world markets.

U.S. crude stocks have been hovering at 24-year lows, deepening fears that an early cold snap this winter could even send prices to Gulf War levels above $40 a barrel.

U.S. Energy Secretary Bill Richardson underlined mounting international pressure on OPEC to raise production.

``The markets around the world, the European Community and Japan are very clearly insisting that there's not enough oil on the market to bring the (price) stability that is needed,'' Richardson said on Wednesday.

President Bill Clinton was scheduled to meet Saudi Crown Prince Abdullah in New York on Wednesday evening to discuss oil issues.

Some OPEC states are calling for the group to raise output by 500,000 barrels per day (bpd), conforming to the loose rules of a so-called price band mechanism, agreed by OPEC earlier this year.

Under the mechanism, OPEC would raise production by a half million bpd once the OPEC basket of crudes trades above $28 a barrel for 20 straight days. OPEC delegates say that Saudi Arabia, the cartel's dominant producer, wants a bigger total supply rise.

Iran's Deputy Oil Minister Hossein Kazempour Ardebili said on Tuesday Iran does not think market fundamentals call for an OPEC production increase beyond the 500,000 bpd.

Oil products gasoline and heating oil also soared on the NYMEX, but industry experts said their gains were tempered ahead of weekly industry data scheduled for release on Wednesday evening, delayed one day because of the the Labour Day holiday.

Rocketing oil prices pushed energy companies shares higher, with No.1 U.S. oil company Exxon Mobil (NYSE:XOM - news) up 1-1/16 to 83-7/8, No.2 Chevron Corp. (NYSE:CHV - news) up 2 1/2 to 88-7/16, and No.3 Texaco Inc. (NYSE:TX - news) up 1-3/8 to 54-9/16 on the New York Stock Exchange.


-- Cave Man (caves@are.us), September 06, 2000


Crude Oil Futures


-- Cave Man (caves@are.us), September 06, 2000.

Fiat currencies ==> Asset bubbles ==> Increased consumption

Oh baby, when this little reaction equation reverses to seek equilibrium it is going to be tough to find cover.

The herd never stirs until the grass grows thin.

-- Will (righthere@home.now), September 07, 2000.


When it does reverse, all of the stock market gurus who "are in it for the long term", will be the first ones looking for someone to sue.

-- J (Y2J@home.comm), September 07, 2000.

How could Creeper be soooooooo WRONG????

-- (Is he really @ THAT. dumb?), September 07, 2000.


Thu, 07 Sep 2000, 3:11am EDT

Crude Oil Breaches $35 a Barrel as OPEC Supply Seen Too Low

By Mark Shenk

Singapore, Sept. 7 (Bloomberg) -- Crude oil rose above $35 a barrel for the first time since the Persian Gulf War in 1990 on speculation any output increase by OPEC this weekend will be too small to meet demand and replenish inventories.

The U.S. Energy Department yesterday projected that growing demand, especially in Asia, will keep world inventories low through next year, leaving oil markets vulnerable to supply disruptions.

``Relative to any point in the last 20 years I have never seen supply and demand as tight as it is today,'' said Roger Plank, chief financial officer at Apache Corp., a Houston-based oil and natural- gas exploration company. ``You could see some significant'' price surges to $40-$50 a barrel.

Crude oil for October delivery rose as much as 29 cents, or 0.83 percent, to $35.19 a barrel in electronic trading on the New York Mercantile Exchange, the highest intraday price since Nov. 9, 1990. The all-time high was $41.15 a barrel on Oct. 10, 1990.

The Organization of Petroleum Exporting Countries has an informal agreement to raise output quotas by 500,000 barrels a day if its benchmark price stays above $28 a barrel for 20 consecutive days. That milestone could be reached on Friday, two days before the group meets in Vienna to discuss production levels. The price was $32.50 a barrel yesterday.

Some traders said prices are being driven higher by the type of oil available as opposed to what the market wants.

``It's less a question of whether there's enough crude supply to meet demand but more whether the producers are supplying what the market wants to buy, which is light, (low-sulfur) grades,'' said Anthony Lim, a crude oil trading manager at Caltex Corp. in Singapore.

So-called light, low-sulfur crude oil yields more high-demand products like gasoline and diesel that meet strict environmental emission standards in the U.S. and Europe.

OPEC pumps mainly heavy, high sulfur grades of crude, while the West Texas Intermediate crude traded in New York is a light, low sulfur grade.

``Until the U.S. government takes a bold step and releases barrels from the strategic oil reserve, the market won't take a breather,'' Lim said.

10-Year Highs

In London, Brent crude oil for October settlement rose $1.30, or 3.9 percent, to $34.28 a barrel on the International Petroleum Exchange, also the highest closing price since November 1990. Brent prices have been at or close to 10-year highs for the past week.

French truckers protesting high prices blockaded refineries for a fourth day, creating gasoline shortages, and farmers are threatening similar protests in Spain.

``We would like prices to go down,'' said Thierry Desmarest, chairman of Total Fina Elf SA, France's biggest oil company, after the company reported profit in the first half of the year more than doubled.

``It's not good for economic development, and I understand perfectly well (some of our customers) are facing considerable difficulties.''

Share prices of U.S. oil companies rose along with crude oil. Exxon Mobil Corp., the world's largest publicly traded oil company, rose 63 cents to 84, and Chevron Corp., the No. 2 U.S. oil company, rose 2.19 to 88.13. Both companies said in July that second-quarter earnings more than doubled to records because of surging energy prices.

Low Inventories

U.S. inventories of crude oil are down 7 percent from a year ago at 289.1 million barrels, while supplies of heating oil are down 38 percent, according to a report from the American Petroleum Institute released after trading yesterday.

The Energy Department, in a monthly report, projected growth in world inventories of 700,000 barrels a day this year, not enough to make up an 800,000-barrel-a-day drop last year.

OPEC meets Sunday to consider a third output boost of the year. Its two past efforts failed to stem the market's advance, and oil prices have gained by one-third this year.

Saudi Arabia said it wants to see lower prices. The world's top producer increased daily output by 600,000 barrels since July and is committed to a price of $25 a barrel, Dow Jones Newswires reported, citing the country's oil minister, Ali al-Naimi.

Prices rose even after al-Naimi's remarks.

``Why should people listen to the Saudis? Inventories are still very low,'' said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons in St. Louis. ``We're in a put-up-or-shut-up mode,'' he said. ``Until the oil starts pouring in, they will be ignored.''

High Taxes

The Saudi crown prince said consuming nations were partially responsible for high oil prices.

``I would like also to note the important role which the consuming countries should play,'' he said in remarks released yesterday by the official Saudi Press Agency. ``Their domestic taxes on oil constitute a heavy burden on consumers, and they should reconsider the rate of those taxes.''

The European Union warned its member governments not to cut taxes on gasoline in an effort to lower fuel prices, saying such a move could be illegal and would give oil producers no incentive to reduce prices.

U.S. Energy Secretary Bill Richardson said he hopes OPEC will ``seriously consider'' increasing oil production to bring stability to the global market. He said the U.S. is seeking a stable price for oil of $20 to $25 per barrel and that prices of $34 a barrel are ``unacceptably high.''

U.S. retail gasoline prices last week rose for the third straight week, rising to $1.53 a gallon, the DOE said yesterday.

Wholesale gasoline for October delivery rose 3.09 cents, or 3.2 percent, to 99.8 cents a gallon on the Nymex. Prices are up 50 percent from a year ago.

-- (M@rket.trends), September 07, 2000.

Better take another look. Prices reversed on Brent by the end of trading.


Last Update: Thursday September 7, 2000 9:45 EST

October 00
($US per bbl.) 9/7 9:39 34.35 34.50/33.46 33.65 --- - 0.630 64561

-- cpr (buytexas@swbell.net), September 07, 2000.

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