Crude Oil Falls $1/barrel on promised OPEC output boost; Short of target : LUSENET : TB2K spinoff uncensored : One Thread

Mon, 11 Sep 2000, 3:47am EDT

Crude Oil Falls $1/Barrel on OPEC Output Boost; Short of Target
By Stephen Wisenthal

Tokyo, Sept. 11 (Bloomberg) -- Crude oil fell almost $1 a barrel after OPEC promised to boost output quotas 3.2 percent. The price decline is less than the exporters' group had targeted as traders expect more oil will be needed to meet demand.

The 11-member Organization of Petroleum Exporting Countries yesterday said it will add 800,000 barrels a day starting Oct. 1. OPEC, which pumps 40 percent of the world's oil, had promised enough to cut prices by more than $5 a barrel to damp inflation concerns and discourage rival producers from lifting output.

``This is just a stop-gap measure to prevent oil prices from rising further, it won't work out in the long run,'' said Dennis Ang, vice president of Statoil Asia Pacific Pte., a Singapore- based unit of Norway's biggest oil company. ``OPEC needed to produce at least 1 million barrels a day more to meet demand.''

Oil fell as much as 2.7 percent, or 93 cents, to $32.70 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It recently traded at $32.86. Crude has risen 29 percent this year and reached $35.46 a barrel last week, its highest level in almost a decade.

OPEC has said it wants to bring the price of its oil benchmark down below $28 a barrel from more than $33 last week. Analysts said that's unlikely anytime soon and short supply of heating and auto fuels means consumers should see little relief.

``For consumers -- taxi drivers, truck drivers -- it won't make much difference,'' said Mohammed Abduljabbar, an analyst with the Washington-based Petroleum Finance Co. For oil, ``it might knock a few dollars off, but it won't send prices below $30'' in New York.

Traders, refiners and analysts in Japan and Australia agreed.

Better Than Nothing

``More oil is better than nothing, but I doubt it's enough to remove the worries about a shortage of winter heating oil,'' said Katsumi Ebihara, an oil products broker at Globally Corp. in Tokyo.

Nippon Mitsubishi Oil Corp., Japan's biggest refiner, said the expected increase won't make much difference to low oil inventories in the U.S., while analysts said the increase may be offset by winter demand.

``The market was saying 500,000 to a million (barrel increase) and they've come in at 800,000,'' said Gordon Ramsay, an oil and gas analyst at Salomon Smith Barney in Melbourne.

``We're expecting prices to come down, but we're going into a northern hemisphere winter so it may not happen right away.''

The decline in oil prices weighed on producers' shares.

PetroChina Co., China's largest oil company, fell 7 cents, or 3.8 percent, to HK$1.79. Broken Hill Proprietary Co., Australia's biggest oil company, fell 7 cents to A$20.10, while the No.2, Woodside Petroleum Ltd., fell 35 cents to A$13.90.

Oil prices have risen 31 percent since OPEC first raised production this year, on April 1. It raised production again in June, though this also failed to slow the rise in prices.


Higher fuel prices are filtering through the U.S. economy. Union Pacific Corp. last week announced an average 3 percent rate increase to haul freight on the largest U.S. railroad, while Dupont Co. last week warned that higher energy costs were hurting profit.

Continental Airlines Inc. and other carriers instituted a $20 fuel surcharge on round trips. Jet fuel prices for delivery in New York harbor have risen 37 percent this year, and more than doubled in 12 months, to $1.054 a gallon. The gain is greater in Asia where shortages are exacerbated by a surge in traffic.

In Singapore, an Asian airport hub, fuel prices have jumped 40 percent this year.

The output increase benefits OPEC members such as Saudi Arabia, the United Arab Emirates and Kuwait, which have spare capacity to ship more crude. Others, such as Indonesia and Iran, may lose out as an inability to pump more leaves them facing lower prices, analysts said.

Divisions between those who can and those who cannot produce more oil created friction during the weekend talks. OPEC members set Nov. 12 for an exceptional meeting, after the U.S. Presidential election and before the holy month of Ramadan, to assess today's agreement and determine whether a further boost was required.

OPEC ministers sought to assure the market that all production commitments would be kept.

``Everyone is going to be able to meet the new quotas we have put in place,'' said Chekib Khalil, the oil minister for Algeria.

Indonesian oil minister Purnomo Yusgiantoro was less certain when asked whether his quota could be met. ``We'll try,'' he said.

Ramsey at Salomon Smith Barney said the new quotas themselves are misleading.

``We believe that OPEC is already producing 600,000 barrels a day over its quota,'' said Ramsay.

So ``production is only going up by 200,000 barrels a day ... they basically have legitimized what they have been doing at the time of the meeting.''

-- (, September 11, 2000



Oil Infusion Coming

OPEC Will Boost Production, but Will it Help?

V I E N N A, Austria, Sept. 10  Under pressure to act to stem rising fuel prices, OPEC today agreed to put an extra 800,000 barrels of oil a day on the market.

Kuwaits minister said that the new agreement, roughly in line with what analysts had expected, will take effect on October 1.

This is our best assessment of what the market needs now, Saudi Arabian oil minister Ali Naimi said. It will improve and moderate the price, and if it doesnt we have a mechanism to trigger some more. The decision, reached after a mornings consultations in the Venezuelan oil ministers hotel suite, were originally to be formalized today. However, final ratification has been postponed until Monday.

Analysts are divided on whether the 800,000 barrels will be enough to bring down the price of crude oil significantly, and are skeptical it will have any immediate impact on gas or heating oil prices in the United States.

Confusion Over Numbers

As with previously announced increases by the Organization of Petroleum Exporting Countries, todays move leaves questions about the numbers, and whether 800,000 barrels per day really means 800,000 barrels per day.

There were indications the production increase actually could range anywhere from 100,000 to 1.3 million barrels per day.

Iraq and Libya said a 500,000 barrel per day production increase will take effect immediately. They say a mechanism established at a prior OPEC meeting dictates such an increase would take effect if the price of oil remained at $28 a barrel for 20 consecutive days.

OPEC would not confirm the assertion, and it was unclear whether the 500,000 barrels would be a component of the 800,000 increase.

However, officials said a similar mechanism will add another 500,000 barrels per day if the market price of crude oil remains above $28 from Oct. 1 to 20.

In addition, some analysts said the 800,000 increase will provide no more than 100,000 fresh barrels of oil to world markets because OPEC members already are producing at least 700,000 barrels above their current quotas.

The last time OPEC raised production it was not clear whether the oil which had already been leaked onto the market was included or not. The same confusion may remain this time.

The lack of clarity during the last two OPEC production meetings resulted in oil prices being raised instead of lowered as OPEC had hoped.

OPEC plans another meeting in November to review the effect of todays proposed measures.

Is 800,000 Enough?

Most analysts appear to agree 800,000 is enough to keep the price of crude oil stable. Others predict that higher demand in the winter months will start oil prices back on an upward trend.

However, the size of the increase offers scant comfort for Americans who depend on heating oil to warm their homes this winter, analysts said.

This agreement is doing nothing for U.S. consumers, nor could it have been expected to given the tightness in the home heating oil market in the U.S. and the refineries lack of capacity, said Leo Drollas, chief economist of the London-based Center for Global Energy Studies.

Refineries are working at full speed to produce heating oil already, he said.

In addition, the new oil will take 40 to 50 days to reach the oil refineries and longer to reach the pumps. By the time it does winter will have set in.

For Americans living in the Snow Belt, Houston-based analyst Bill Edwards offered this advice for coping with cold winter weather: Chop wood.

Outrage in Europe

High fuel costs have sparked concern and even outrage in several consuming nations. French truckers and taxi drivers last week blocked roads to protest gasoline prices, while farmers in Britain mounted similar, if smaller efforts to disrupt traffic. Americans living in areas where there is heavy snowfall worry that low fuel inventories will lead to soaring prices this winter.

On a diplomatic level, European finance ministers expressed concern that surging prices could crimp world economic growth, and they discussed taking the exceptional step of sending an envoy to the OPEC meeting in Vienna to ask for an increase in output.

Finance ministers from 21 Pacific Rim countries, meanwhile, had warned that rising oil prices could damage their economies. Officials attending the Asia-Pacific Economic Cooperation forum in Brunei issued a statement today urging OPEC members to stabilize oil prices.

We did all that we could, but we cannot solve the whole problem, Attiyah, the Qatar oil minister, told reporters. He called upon oil-consuming nations to cut taxes on fuel usage.

ABCNEWS Sue Masterman and The Associated Press contributed to this report.

-- (, September 11, 2000.

OPEC CAN'T boost production 3.2 percent. That amount must be pro rated among all the OPEC countries, and most of them have already reached capacity.

This was the dip in oil prices you were supposed to buy on.

-- Whatever (, September 11, 2000.

The buying opportunity seems to be passing.

September 11, 2000 10:55 AM

Oil Soars as Market Dismisses OPEC Deal

A News Roundup

NEW YORK -- Oil prices surged Monday morning despite the decision by the Organization of Petroleum Exporting Countries to raise production quotas.

Also in New York, natural gas prices soared to record levels.

Shortly before 10:45 a.m. at the New York Mercantile Exchange, October crude oil was up $1.27, or 3.8%, to trade at $34.90 a barrel. November crude oil jumped $1.23, or 3.8%, to $34 a barrel. Both contracts plunged $1.77 a barrel Friday amid nervousness ahead of the OPEC's ministerial meeting in Vienna.

October heating oil surged 4.11 cents, or 4.1%, to $1.0360 a gallon after losing more than three cents Friday. At its best Monday, October heating oil peaked at 1.039 cents, a new post-Gulf War high. October gasoline rallied two cents, or 2.1%, to 97.05 cents a gallon after dropping more than five cents Friday. 00911-000351-1055

-- Cash (, September 11, 2000.

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