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Oil dips on supply fears Venezuelan official suggests more production if price of crude tops $22 July 20, 1999: 5:09 p.m. ET

NEW YORK (CNNfn) - Oil prices slipped sharply Tuesday after the market was unnerved by suggestions that a key deal to limit global production could unravel. The head of Venezuela's state oil company, Roberto Mandini, told a congressional hearing in Caracas that supply should be increased if the U.S. benchmark price for oil exceeds $22 a barrel. U.S. trading followed the downward path set in European markets in the wake of Mandini's remarks. The light sweet crude oil contract for August delivery shed $1.04 to close at $19.40 a barrel in New York, a dip of 5.8 percent. In London, the September Brent contract fell 64 cents a barrel to close at $18.56, at the lower end of the $18 to $20 trading range targeted by the Organization of Petroleum Countries. The U.S. benchmark price last week breached $20 a barrel for the first time in 20 months, propelled by expectations that the production cuts agreed in May by OPEC would continue to be observed. Traders said Mandini's remarks accounted for half of Tuesday's slump, with the balance coming from technical selling. OPEC is due to meet in Vienna in September, but other member countries have said that boosting production is not being considered. Saudi Arabia, the world's largest oil exporter, and Mexico sought to shore up confidence by insisting that they would maintain current production levels.

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What you have here folks is a good old fashioned greed fest. I for one am cautiously optimistic regarding this development. What's happening is that the Vens, who are suffering through economic and sociopolitical woes, are making noise that they're gonna jack up production. They're gonna pump more oil out of the ground.

This may spoil the little OPEC cooperation pact we've had going for some time now, but more bbls in the world would be a good thing ahead of Y2K. This pact has effectively tightened world markets to the point that the longstanding overhang created two years ago has been chopped down substantially. Inventories have been slowly worked down.

This has meant an increase in the cost of crude. It also means that if we continue along this path, we will run into production defecit mode at precisely the time when we will need physical barrels the most. That would be Q4-99 Q1-00 for you idiots out there!

My projections showed a huge drawdown in global supply demand balance comming sometime between Q3-4 of this year. If everyone begins cheating and overproducing now that they like the price, fine and dandy. If they manage to produce a crater in prices which only leads to further cuts in Sep. then we've got problems.

Hopefully someone smart out there (I HOPE YOU CIA/NSA/DIA DIPLOCRYPTOANALYSTS ARE READING THIS, IF YOU ARE, GET YOUR ASS TO VIENNA IN SEPT AND TELL EM TO JACK UP THE BARRELS) will give these guys a big hint (tax break, IMF incentive, whatever) to produce more bbls.

That will give us the physical leeway we're gonna need to eek through this one. I'm reminded of a saying by my favorite psycho Seal, Richard Marcinko, "Better to have it and not need it, than to need it and not have it" also "Two is one, one is none".

-- Gordon (g_gecko_69@hotmail.com), July 20, 1999

Answers

This could help. Now as long as refining it is not a problem....

-- Mike Lang (webflier@erols.com), July 21, 1999.