International Energy Agency: Oil shortage looming due to strong demand, tight supplies (Associated Press)

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International Energy Agency: Oil shortage looming due to strong demand, tight supplies Copyright ) 2000 Nando Media Copyright ) 2000 Associated Press

From Time to Time: Nando's in-depth look at the 20th century

By BRUCE STANLEY

LONDON (January 20, 2000 7:22 p.m. EST http://www.nandotimes.com) - A respected industry study said Thursday that 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.

"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 2/4-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.

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-- Hokie (Hokie_@hotmail.com), January 20, 2000

Answers

The SPR will not be mush of a factor beyond being a threat. It will take too long to get enough of the reserve out of storage to make any price impact. besides there isn't all that much oil there anyways and it isn't of particularity high grade.

-- Ishkabibble (ishman@home.com), January 21, 2000.

If the big buyers bought extra because of the threat of y2k at the end of 99 then why is there a shortage????they have the extra they bought.this has been a very mild winter up to a week ago.Some of these statements dont add up.

-- J (jax@borg.com), January 21, 2000.

J, sorry you are so perceptive. This was supposed to be the basic template for the smoke screen for the price rises in January. They will need a new smoke screen for the rises in Feb and March.

Course, you gotta hand it to them for getting this out so soon.......

-- Chuck, a night driver (rienzoo@en.com), January 21, 2000.


Why do "they" always say HOARDING in regards to the public, but the gov. and oil industry stockpiled? I have a 35 gallon tank, do I hoard when I fill it up? Just curious.

-- Just Curious (jnmpow@flash.net), January 21, 2000.

This is not plausible at all. Prices should have taken a major dive after rollover if supply had remained constant and stockpiles were drawn down. Prices for refined products should go up if there are refinery problems. But oil should actually drop if the supply exceeds current refinery needs.

The market is telling us something quite different.

-- Dog Gone (dawgawn@yahoo.com), January 21, 2000.



Dang it, I hate it when you zany lovable doomers are right, but you're right; this story just doesn't add up. The only credible part is that production is down. It's so frustrating that we don't know why, or how much, or for how long. :(

-- Servant (public_service@yahoo.com), January 21, 2000.

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