Analysts predict oil price could rise to $40 a barrel

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Analysts predict oil price could rise to $40 a barrel

Prices could rise to $40 a barrel in New York and $35 in London by the end of this year, according to analyst.

August 16, 2000, 02:57 PM LONDON (AFP English) - Oil prices could rise to 40 dollars a barrel in New York by the end of this year, analysts said on Wednesday, as price levels remained around 10-year-high levels here. The chief economist at the Centre for Global Energy Studies Leo Drollas said prices could rise to 40 dollars a barrel in New York and 35 dollars in London by the end of this year - but only if the Organisation of Petroleum Exporting Countries (OPEC) did not agree an output increase at its ministerial conference in Vienna on September 10.

He also stressed that such price rises would be occasional spikes, not average levels.

Moreover, Drollas predicted that OPEC would agree to pump at least 500,000 extra barrels a day.

The producers' organisation has already increased production twice this year in an attempt to stabilise prices which have tripled since late in 1998.

The head of commodities risk management at the Royal Bank of Scotland, Andrew Hartree, said he "wouldn`t bet against" Brent prices rising to 35 dollars a barrel over the next few months.

http://www.arabia.com/article/0,1690,Business|27136,00.html

-- Martin Thompson (mthom1927@aol.com), August 16, 2000

Answers

Focus: U.S. Oil Prices May Hit 40 Usd As Clinton Administration Lobbies Saudis AFX News Limited JUSTIN COLE

August 16, 2000

WASHINGTON (AFX) - U.S. crude oil prices are seen remaining at historical highs in the next couple of weeks and could even rise further to 40 usd, underpinned by tight supplies, as the Clinton administration lobbies Saudi Arabia to raise its output, said oil traders.

Oil futures prices on the New York Mercantile Exchange and Brent crude prices on the International Petroleum Exchange in London have nudged 10 year highs in the last twenty four hours, and some commodity funds have bought up options in the expectation that supplies will not increase soon.

"There was a brief rally this morning... we are just stair stepping ever higher until we get a re-dedication by OPEC to lower prices," John Kilduff, a senior vice president at Fimat U.S.A in New York, told AFX News.

"We could see price spikes of up to 40.00 usd a barrel over the coming weeks. Given supply, especially for heating oil here in the (U.S.) northeast and the tight crude situation, I'd say if we get one bad report it will send prices up near those levels," said Kilduff.

Tom Bentz, a New York-based oil trader at Paribas Futures Inc, also agreed that U.S. oil prices could nudge 40.00 usd a barrel in coming weeks "as long we remain with low stocks we will be susceptible to prices spikes."

"The (next) OPEC meeting is on September 10. Right now, the Saudis are pretty much the only country that have additional capacity, so if there is an agreement to raise output it's pretty much all going to come from the Saudis," said Bentz.

OPEC ministers are next due to meet in Vienna on Sept 10.

Rumors in the market today have suggested that U.S. President Bill Clinton has written to Saudi Crown Prince Abdulla bin Abdel Aziz highlighting his concern about high oil prices.

The Clinton administration is under acute pressure to reduce oil and physical gasoline prices ahead of November's presidential election, but traders see no immediate relief to the supply situation on the horizon.

Traders said the administration is applying diplomatic pressure on the Saudis to increase their output, but it is yet unclear how the Saudis will respond.

Kilduff believes that the Saudis are likely to maintain the high prices for now in a bid to underwrite unity within OPEC.

However, other market watchers believe OPEC will be forced to lift its production by between 500,000 and 800,000 barrels-a-day.

Front month IPE Brent prices continued to trade at a premium to Nymex oil futures in early afternoon trading. At 2.10 pm, the IPE September contract was trading at 32.45 usd a barrel compared to the Nymex September futures price of 31.58 usd a barrel.

The IPE price premium has currently cut off any arbitrage relief for U.S. oil companies looking to ship oil from Europe to the U.S. in a bid to ease the tight supply situation.

Fresh weekly data released earlier today from the U.S. Energy Information Administration (EIA) showed crude oil stocks rose 3.4 mln barrels to 288.8 mln in the week ended Aug 11 from the previous week.

The EIA data compares with an estimate released yesterday by the American Petroleum Institute, a private trade association, which said crude oil stocks rose 7.40 mln barrels to 286.40 mln.

Despite the weekly crude builds, the EIA and API data shows oil inventories are still significantly down from 1999 levels.

Year-on-year, U.S. crude oil stocks are down 37.7 mln barrels, according to the EIA.

http://denver.petroleumplace.com/egatecom/scream/2000/08/16/ANL/5639- 1333-FOC.ECO.GOV.CRU.USA.GBR.GUL.OIL..html

-- Martin Thompson (mthom1927@aol.com), August 17, 2000.


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