Oil Holds Highs as Supply Concerns Mountgreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
September 19, 2000
Oil Holds Highs as Supply Concerns Mount
LONDON, Sept 19 - Sizzling oil prices steadied on Tuesday after posting fresh 10-year peaks as consumers in the West continued to fret over possible winter fuel shortages.
London Brent crude for November delivery slipped 24 cents to $34.22 a barrel having powered $1 a barrel higher on Monday to a new 10-year high of $34.98 a barrel.
U.S. light crude oil futures were off 20 cents at $36.63 per barrel after setting on Monday a post-1991 Gulf War pinnacle of $37.15.
Oil prices have rallied almost $3 in under a week, driven by fear that dwindling Western fuel stocks will provide inadequate cover for the peak-demand northern hemisphere winter.
Assurances from OPEC power Saudi Arabia on Monday that the cartel could lift supplies again before the group's November 12 extraodinary meeting did little to soothe consumers' concern.
Fears of a supply crunch are particularly acute in the United States, the world's biggest oil consumer, where heating oil stocks are running 40 percent below last year.
And oil prices are likely to remain steamy unless weekly inventory data from the American Petroleum Institutereleased late on Tuesday show oil stocks in the United States are piling up, analysts said.
CONSUMERS LASH OUT
Consuming countries, fearful that higher energy costs could revive inflation and slow economic growth, have been calling on the Organisation of the Petroleum Exporting Countries to release yet more supplies to knock down stubbornly high oil prices.
The International Monetary Fund (IMF) added its voice to the consumer chorus on Tuesday, warning that the highest oil prices in a decade could slow world economic growth by half a percentage point next year.
``Rather than 4-1/4 percent next year, we think of 3-3/4, assuming that the increase in oil prices does recede gradually over the course of the year,'' IMF chief economist Michael Mussa said.
``If oil prices were to stay at $35 a barrel throughout 2001 or if they were to escalate to $40 a barrel or over, then the impact on inflation and world growth would be more significant,'' Mussa said.
OPEC moved to ease importers' fears just over a week ago by agreeing to boost output by three percent or 800,000 barrels per day (bpd) from October 1.
The cartel has now agreed three output rises this year -- bringing total production increases to 3.2 million bpd.
OPEC Secretary General Rilwanu Lukman said on Tuesday he expected rocketing oil prices to drop very soon and repeated that the cartel would pump more oil if needed.
``If prices remain high, we don't need a meeting, we won't wait for the meeting. We'll act,'' Lukman told Reuters on his arrival in Jakarta, where he will attend an oil conference.
OPEC HAS EXTRA OIL IN HAND
Under its informal price band mechanism, OPEC can lift supplies by a further 500,000 bpd if its basket of seven crudes stays above $28 for 20 consecutive working days after October 1.
Lukman's remarks echoed those made by Saudi Oil Minister Ali al-Naimi on Monday. Naimi also said the cartel could consider a fourth output hike before its meeting in November ``if the need is there.''
The Saudi oil chief reiterated that the kingdom wanted prices at $25, adding the new OPEC hike would start to affect prices in October.
``I believe that inventories are building and in a short time we shall see that in the price,'' he said.
But there was little on the horizon to assuage angry consumers, who have been staging widespread protests across Europe against high taxes and duties on fuel.
Japanese Finance Minister Kiichi Miyazawa said on Tuesday that finance ministers and central bankers from the Group of Seven industrial powers would discuss surging oil prices at this weekend's meeting in Prague.
Oil traders are also concerned Iraq could disrupt its export sales in the run-up to November's U.S. presidential election.
Iraqi President Saddam Hussein said on Monday that fellow OPEC members should ignore pressure mounted by ``superpowers'' on producers to rein in runaway prices.
Tensions in the Middle East have been running high since Baghdad last week revived allegations that Gulf neighbour Kuwait was stealing its oil, a charge Kuwait denies. A similar charge triggered Iraq's invasion of the emirate in 1990.
-- Martin Thompson (email@example.com), September 19, 2000