UPDATE 4-Oil higher on U.S. winter, Iraq worries November 15, 2000

(adds last prices)

LONDON, Nov 15 (Reuters) - Oil prices rose on Wednesday after a decline in already depleted heating oil stocks in the United States and a threatened halt of Iraqi exports sent shivers through the global oil market.

Brent crude oil ended up $1.24 a barrel at $33.93 a barrel just below the session peak at $34 but some way off the 10-year high of $35.30 seen on October 12.

U.S. light crude oil was up 73 cents at $35.60.

With colder weather approaching, winter supply jitters were reinforced by data from the American Petroleum Institute that showed a 665,000-barrel drop in U.S. heating oil stocks leaving supplies more than 30 percent below this time last year.

The data was confirmed on Wednesday afternoon by a Department of Energy report, which showed a 500,000 barrel fall in heating oil supplies, but a rise in crude and gasoline stocks.

``Crude and heating oil inventories remain alarmingly, stubbornly low,'' U.S. Secretary of Energy Bill Richardson told executives and ministers at a lunch in London.

IRAQ SEEKS 50-CENT PREMIUM

Adding to the concern, Iraq, which sells about five percent of the world's crude oil exports, has informed its customers that from December 1 it wants a 50-cent premium paid on each barrel of crude outside United Nations-controlled accounts.

``They've contacted everybody by phone. (They said) the ones who don't do it won't get new contracts,'' said one crude oil trader with a European company.

But most major companies say they will be unable to comply with the request as it would mean circumventing the U.N.'s sanctions on Baghdad, which require funds from the sale of oil put into special escrow accounts for food and humanitarian aid.

This sets up yet another potential conflict between Iraq and the U.N. after a series of moves in the past few weeks -- including a switch for payment to euros from dollars and a request to extend the current oil-for-food programme.

The constant threat of interruption to the supply of oil has kept markets on edge, particularly with a cold front now headed to the U.S. northeast, where heating oil stocks are about 40 percent below last year's level.

``On middle distillates there is panic in the market,'' said Nigel Saperia, oil trader at Glencore in London.

``It's a chilly feeling knowing that OPEC producers are close to full capacity. Overall there is no shortage of oil'' but there are acute shortages in localised areas like the U.S. northeast, he added.

U.S. CALLS FOR MORE SUPPLIES

The U.S. remains concerned about supply shortages despite views by market analysts and by oil cartel OPEC that crude supplies would exceed demand in the coming months.

``We still think there's a supply problem; that the world needs more production,'' Richardson said during an interview on CNBC news network.

He said current prices of around $34 were too high, that the Clinton administration would prefer crude to drop to the $20-to-$25 price range and that a re-opening of the U.S.' strategic petroleum reserves was still ``on the table.''

In October the U.S. started to release 30 million barrels of specially held reserve crude oil in an effort to ease prices off highs not seen since the 1990 Gulf War.

OPEC ministers on Monday gave little cause for markets to retreat as they ratified an agreement to keep output quotas unchanged after raising supplies four times this year.

Officials from top oil producers and consumer nations will hold a key meeting in Riyadh, Saudi Arabia, where Richardson said he hoped ``dialogue may help the stability of the oil market.'' Richardson will fly to Riyadh later on Wednesday.

The cartel predicts that prices will soon fall within its $22-$28 target range as the full impact of the group's 3.7 million barrels per day rise this year hits the market.

OPEC meets again on January 17 by which time analysts expect a year-on-year deficit in inventories to have turned into a surplus.

^ REUTERS@

http://www.individual.com/story.shtml?story=d1115154.401

-- Martin Thompson (mthom1927@aol.com), November 15, 2000

Answers

Seems like I posted this story before. The saga continues.

-- Martin Thompson (mthom1927@aol.com), November 15, 2000.