Oil demand up due to feared y2k disruptions

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IEA: Oil shortage looming due to strong demand, tight supplies

By BRUCE STANLEY The Associated Press 01/20/00 6:10 PM Eastern

LONDON (AP) -- Global demand for oil increased much faster than supplies at the end of last year, pinching inventories and driving up prices as buyers hoarded crude ahead of feared Y2K-related disruptions, a respected industry study said Thursday.

"The numbers show markets that are tight and getting tighter," said the monthly report by the International Energy Agency.

Signs that OPEC will extend its production cuts in output beyond March has added to upward pressure. Prices for the benchmark oils of Europe and the United States rose by more than 4 percent in December and surged further this week. West Texas Intermediate crude in the U.S. was flirting with $30 a barrel, a level not seen since the January 1991 outbreak of the Gulf War.

"The market needs more oil now. But non-OPEC supply is growing only slowly in response to the price rises of the last nine months," the report warned.

World demand for oil swelled to "an extremely strong" 77.3 million barrels per day in the last three months of 1999, exceeding available stockpiles by 3.1 million barrels daily.

The Paris-based IEA is part of the Organization for Economic Cooperation and Development, a group of the world's richest countries.

Demand should ease slightly this month, it said, as buyers work though inventories they built up as a precaution against Y2K-related supply interruptions. And economic growth seems to be offsetting the economic impact of higher oil prices in much of the world.

"I don't think we're near a crisis stage," said Peter Gignoux, head of the petroleum desk at Salomon Smith Barney Citibank. "They're raising a flag and saying, 'Watch out, this market is getting short of oil."'

A recent cold snap in the northeastern United States has helped underpin prices.

Oil refiners, meanwhile, have seen profit margins squeezed as crude prices more than doubled in the past year while prices have increased at a slower pace for gasoline and heating oil.

U.S. gasoline prices rose to a 3{-year high of almost $1.35 a gallon in early December before slipping back 2 cents in early January, according to the Lundberg Survey of 10,000 stations.

A short-lived slump in crude prices, due partly to the realization that Y2K fears were overblown, was the most important factor in that decline, analyst Trilby Lundberg said.

OPEC nations have slipped a bit in complying with production quotas, but firm prices haven't led non-OPEC producers to flood world markets with their own oil.

Adding to the pressure, fewer new fields are coming on line and oil ministers from Saudi Arabia and Venezuela began talking last week about extending OPEC production cuts beyond an expected March expiration date. Analysts said they would probably do so through June


-- Martin Thompson (mthom1927@aol.com), January 20, 2000


I'm not convinced yet either way about the oil/y2k issues. But this article shows it will be VERY difficult to determine specific cause-effect even if there really were, for example, refinery problems related to y2k. Lots and lots of variables.

Unless there is a very big problem that comes to light, we may never know any effect (if there is one!)

-- Bud Hamilton (budham@hotmail.com), January 20, 2000.

As we've always known, oil is one of the Achilles Heels of the whole Y2K situation, yet I'm seeing very few reports nationally or internationally as to the production and supply situation. Yesterday, however, the nation's two largest airlines - United and American - joined Continental in adding a $20 "fuel surcharge" to round-trip tickets, effective Feb.1. Press articles have given no reasons for the surcharges. My question is, do the airlines know something about coming developments in fuel supplies that we don't? And if so, what is it? Anybody got any news or ideas?

- Doug Stewart

-- Doug Stewart (Stewart@rt66.com), January 21, 2000.

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