Crude Oil Steady After OPEC's 4th Quota Increase This Yeargreenspun.com : LUSENET : TB2K spinoff uncensored : One Thread
Mon, 30 Oct 2000, 10:50pm EST
Crude Oil Steady After OPEC's 4th Quota Increase This Year
By Mark Shenk
Singapore, Oct. 31 (Bloomberg) -- Crude oil was little changed after OPEC increased its output quotas for the fourth time this year, amid rising winter demand and low world inventories.
Ten of OPEC's 11 members agreed to raise output by 2 percent, or 500,000 barrels a day. The previous output increases failed to quell a 28 percent rally this year. Oil rose to a 10-year high of $37.20 a barrel on Sept. 20, threatening to stifle demand and encourage a switch to alternate energy sources.
``This market has a voracious appetite for more oil,'' said Phil Flynn, senior market analyst at Alaron Trading Corp. in Chicago. ``Even with this (OPEC) announcement, it's still stuck above $30.''
Crude oil for December delivery traded as much as 9 cents a barrel higher, at $32.90, after falling as much as 4 cents to $32.77 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Prices are up 46 percent from a year ago.
The Organization of Petroleum Exporting Countries implemented an agreement to boost output by 500,000 barrels a day after their price benchmark stayed above $28 a barrel for 20 consecutive trading days, starting Oct. 1. The price was $30.91 Friday, the 20th day.
U.S. crude oil supplies are close to a 24-year low, according to the American Petroleum Institute.
Close to Capacity
The new OPEC quotas for Iran and Venezuela, the group's two biggest producers after Saudi Arabia, may exceed their sustainable capacity, according to Bloomberg estimates.
The Saudis have said they are prepared to increase production beyond their quota to make up for any shortfall from members that can't pump any more.
OPEC is raising output in a bid to reduce its benchmark price to between $22 and $28 a barrel, a range the group estimates would allow growth in demand while limiting competition from other oil producers or from non-petroleum energy sources such as wind and solar power.
OPEC's increase would be more than offset by an output cutoff from Iraq, which said it will start pricing its oil in euros starting Wednesday. Iraq, OPEC's fourth-largest producer and the only member without a quota, no longer wants to sell its oil in dollars, the currency of a country it considers an enemy.
Concern that Iraqi exports might be disrupted ``is offsetting what we are hearing out of OPEC,'' said Warren Tashnek, an analyst with Fimat USA Inc. in Houston. ``We still have a real tight crude situation here and the potential loss of any oil makes the market nervous.''
Iraq has been under UN sanctions since its 1990 invasion of Kuwait. Since late 1996, it has been allowed to export crude oil to pay for food, medical supplies and spare parts for its oil industry.
Crude Seen Easing
London crude oil prices will probably end the year close to $28 a barrel, down about 10 percent from current levels, as higher OPEC output and a seasonal slowing in demand cause inventories to rise, a Bloomberg survey said. London prices tend to be $1.50 to $2 a barrel cheaper than New York futures.
The price for Brent crude oil in London will end the year at $27.79, according to the average projection from 10 analysts and traders, with forecasts ranging from $23.50 to $30.25 a barrel. Prices this month reached a 10-year high as escalating Middle East tension increased concern that supplies from the region could be disrupted.
Oil prices on the International Petroleum Exchange have climbed 24 percent this year on perceived supply shortages.
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-- (M@rket.trends), October 30, 2000