10/01 23:34

Singapore: Crude Oil Gains Again After EU Eschews Tapping Reserves (Update1)

By Dudley White

Singapore, Oct. 2 (Bloomberg) -- Crude oil rose for a second day after European Union governments decided against tapping their strategic reserves to ease a shortage that last month sent prices to near 10-year highs.

EU ministers Friday called for talks with oil-producing nations and said that dipping into their reserves remains an option for the future. The decision not to add to lean supplies comes as inventories of fuels such as heating oil are low ahead of the Northern Hemisphere winter when demand typically rises.

``The European decision pushed low product inventories in the U.S. back into the fore,'' said Kazuya Fujime, managing director at the Institute of Energy Economics in Tokyo. ``I'm afraid Asian economies may take the brunt of strong oil prices, which could slow the U.S. economy.''

Crude oil for November delivery rose as much as 56 cents, or 1.8 percent, to $31.40 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The contract rose 50 cents Friday after the EU decision.

While crude oil has risen 22 percent this year, it fell 16 percent since reaching a near 10-year high of $37.80 a barrel on Sept. 20 after U.S. President Bill Clinton decided to release 30 million barrels of oil from the nation's reserves, beginning Oct. 1, over 30 days to boost supplies.

German Finance Minister Hans Eichel told reporters in Brussels Friday that Europe's strategic reserves ``can only be used if there is a shortage, not to reverse price increases.'' As for OPEC's suggestion that the Europeans cut taxes to reduce costs to consumers, such action would ``send the wrong signal,'' according to Eichel, who wants to increase energy efficiency.

-- Carl Jenkins (Somewherepress@aol.com), October 02, 2000

Answers

and here's the rest of the story:

Protests

The EU ministers ruled out an across-the-board cut in fuel taxes. Truckers, farmers and other consumers have protested across the region in recent weeks because of soaring fuel costs.

The EU's decision not to add to crude oil supplies comes as U.S. heating oil inventories are 36 percent below levels a year earlier, according to the American Petroleum Institute.

Higher crude oil prices are starting to hurt Asian economies most of which, including Japan, Korea, China and India, depend on imports to fuel their industries and transportation.

India, which imports almost 70 percent of its crude oil, raised gasoline prices by almost 11 percent, cut subsidies on kerosene and reduced import taxes on crude oil staring Sept. 30 to cushion the impact of higher crude oil prices. Yesterday, Malaysia, a crude oil exporter, said it will raise fuel prices for the first time since 1984 to reduce the subsidies it pays because of the gain in global crude oil prices. The government raised gasoline prices by 9 percent and diesel prices by 5 percent.

Indonesia, the only net oil importer in the Organization of Petroleum Exporting Countries, raised fuel prices by an average 12 percent from Oct. 1, also to reduce government subsidies. Gasoline prices in the country, some of the lowest in the world, rose to 1,150 rupiah (13 cents) a liter, from 1,000 rupiah. Philippines

In the Philippines, Petron Corp. and Pilipinas Shell Petroleum Corp., the nation's No. 1 and No. 2 oil refineries, raised gasoline prices by as much as 7.3 percent over the weekend, the biggest increase since the country's oil industry was deregulated in early 1998.

Even with those higher prices refiners in the region are either losing money or making little profit, industry officials said. A surplus of refining capacity in the region has forced refiners in Singapore, the largest crude oil processing center in the region, to run at about 55 percent capacity.

``In certain markets it's been extremely difficult to raise prices because of political and consumer resistance,'' said Jock McKenzie, chairman and chief executive of Singapore-based Caltex Corp. last week.

``Perhaps the two best examples at the moment are the Philippines and Thailand,'' said McKenzie. ``In both those markets the industry is losing money right at the moment. Retail prices don't reflect the high input costs.''

http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial% 20News&s1=blk&tp=ad_topright_topfin&T=markets_bfgcgi_content99.ht&s2=b lk&bt=ad_position1_topfin&middle=ad_frame2_topfin&s=AOdgCOhRuQ3J1ZGUg

-- Carl Jenkins (Somewherepress@aol.com), October 02, 2000.

It's absolutely amazing. When refineries in this country are running at full capacity, and can't produce enough diesel, jet fuel, and heating oil to stay up with demand, Singapore refineries are bleeding because they are running at only 55% capacity. This should prove once and for all that there is a definate oil shortage. It also should prove that the pathetic state of American refinery capacity has all the markings for getting us into deep deep trouble.

-- Chance (fruitloops@hotmail.com), October 02, 2000.