Posted at 2:56 p.m. PDT Tuesday, June 6, 2000

Oil stabilises after attack of OPEC jitters

LONDON, June 6 (Reuters) - World oil markets recovered some of their poise on Tuesday after conflicting policy statements by dominant OPEC power Saudi Arabia scared prices lower on Monday.

July Brent Blend crude ended 22 cents firmer at $28.59 a barrel after sliding 68 cents on Monday.

Traders were sifting through a continuing slew of statements by OPEC officials signalling the cartel may be ready to contemplate an output hike at a policymaking meeting on June 21.

Dealers want to know if the Organisation of the Petroleum Exporting Countries will make good on an informal pact to lift output by 500,000 barrels per day if prices continue to rise.

OPEC President Ali Rodriguez said there were no plans to delay an increase if the stability pact's trigger is reached -- something analysts say could happen as early as Wednesday.

Rodriguez has said the trigger will activate when the 20-day average of a basket of OPEC crudes rises above $28 a barrel.

Asked if there was a likelihood of delaying the production hike due to differences within OPEC, Rodriguez told reporters: ``that is not planned, but obviously I am in constant communication with other ministers and any recommendations they make will be taken into account.''

The average for the OPEC basket for the last 20 days to Monday stood at $27.90 a barrel.

Oil Minister Ali al-Naimi on Monday signalled the stability pact needed more preparation before it could be used -- but he also later said buoyant markets probably needed more crude, something the mechanism will provide if OPEC agrees to use it.

The recent rally has largely been due to gasoline market woes in the United States, the world's largest consumer, and some in OPEC say more crude will not address that situation.

Rodriguez's remarks failed to hurt sentiment, and likewise bears were unable to make mileage out of remarks by Mexico's Energy Minister Luis Tellez that producers should supply more when the second quarter concludes at the end of the month.

Bulls on the other hand were galvanised by remarks from a Middle Eastern diplomat in New York that Iraqi oil would stop flowing for about 10 days at start of the eighth phase of the oil-for-food sale.

Later an Iraqi oil industry source insisted that Iraqi oil officials were still working towards a smooth transition to the next phase of the U.N. oil-for-food programme to ensure there was no gap in export flows currently of around 2.5 million bpd.

In other news, the U.S. Energy Information Administration said world demand for crude would be higher in the current and fourth quarters than previously thought, but unchanged in the third quarter.

At the same time, in its monthly short-term energy outlook, the agency's estimate for world oil supplies increased dramatically for the rest of the year, with supplies able to keep up with demand except for during the fourth quarter.

The EIA said world oil demand would be 200,000 barrels per day higher in the current quarter, unchanged in the third quarter, and 100,000 bpd more in the fourth quarter than it previously forecast.

http://www.sjmercury.com/breaking/docs/029289.htm

-- Martin Thompson (mthom1927@aol.com), June 07, 2000