SATURDAY 30 SEPTEMBER 2000 Europe holds its oil reserves

OPEC threatens production Saudis try to broker peace Gary Duncan Economics Editor

EUROPES governments yesterday backed away from moves to unlock the EUs emergency fuel reserves to help take the heat out of world oil prices.

Europes finance ministers failed to reach agreement on proposals to mirror the US decision to release stocks from its strategic petroleum reserve.

The ministers, did not rule out future action on the idea, but deferred any decision in the face of opposition from some sceptical EU governments, led by Germany.

Hans Eichel, the German finance minister said: "There is an EU agreement. [The oil reserves] are only there to deal with supply shortages and not with jumps in the oil price," he told a briefing.

Spain and France, which had been backing a release of the emergency reserves toned down their arguments.

The backtracking came after hardline members of the OPEC oil production cartel warned that releasing EU reserves could provoke production cuts.

But in the latest display of Saudi Arabias determination to stabilise the crude price and

adopt a conciliatory stance to Western oil consumers, its oil minister, Ali al-Naimi, said that the release of emergency reserves by industrial nations would have no impact on OPEC policy.

Speaking at the cartels summit in Caracas, Mr al-Naimi said: "Even with these measures that have been taken, releasing some of these reserves ... I am sure we will consider additional supplies. So the release from the reserves does not diminish our commitment to a stable, fair price..."

In a further soothing note, the Saudi minister added that his country was ready to use its full crude capacity if other OPEC states were unable or unwilling to pump more oil and more action was needed to curb prices.

He said: "We hope everybody will contribute. But should the ability to contribute be constrained for whatever reason, we would definitely use all our capacity to do it."

The minister said Saudi Arabia was now pumping 8.5 million barrels of oil a day, with the capacity to raise output by a further 2 million barrels.

After Saudi comments raised confidence that oil output will be raised and saw prices falling nearly four per cent on Thursday, the crude market was little changed yesterday.

London Brent crude futures were trading around $29.45, while benchmark US light crude futures stood around $30.50.

Despite the EUs finance ministersreversing away from a release of its strategic oil stocks, the president of the European Commission, Romano Prodi continued to push the case for the measure.

Mr Prodi said the results of the US release of reserves were already been seen in lower crude prices, telling reporters: "What has been done by the United States could have been done by Europe."

THE EUs finance ministers also reached broad agreement on new moves to crack down on money laundering after resolving a row on whether lawyers should have to report suspicious dealings by clients. The dispute had seen Germany threatening to vote against the proposed measures.

http://www.thescotsman.co.uk/business.cfm?id=TS00154033&d=Business&c=business&s=9&keyword=the

-- Martin Thompson (mthom1927@aol.com), September 30, 2000

Answers

I still say what difference does it make if Saudi Arabia uses all of its spare capacity to produce crude and the EU and U.S. make all of their reserves available? The refineries still can't process all that oil, and there will still be shortages of heating oil, diesel and jet fuel.

-- Uncle Fred (dogboy45@bigfoot.com), September 30, 2000.