http://dailynews.yahoo.com/h/nm/20000908/bs/energy_opec_dc_7.html
Friday September 8 3:25 PM ET
OPEC Raises Hopes for
Cheaper Oil
By Richard Mably
VIENNA (Reuters) - OPEC Friday gave grounds for optimism that the oil cartel
will mount its third supply increase in a year to soothe an international outcry
over high energy costs.
The Organization of the Petroleum Exporting Countries, under fire to ease
fuel bills and temper inflationary pressures, is thought likely to lift output
by about 700,000 barrels daily, just under 3 percent, when it meets Sunday.
``OPEC is going to do its part to lower the crude price to within the target
band,'' said Saudi Oil Minister Ali al-Naimi, referring to the cartel's
preferred price range of $22-$28 a barrel.
But petroleum producers should not take sole responsibility for prices that
hit decade-highs this week, he added on his arrival in Vienna.
``We hope that the consuming countries will do their part to lower the
product price and lower the burden (on consumers),'' Naimi said, a reference to
taxes that account for three-quarters of the price of petrol in Europe.
Expectations are that Saudi, OPEC's leading producer, will add its share of
new oil to a large dose of leakage that already has the kingdom pumping well in
excess of its official quota.
That pushed world crude prices Friday sharply lower from Thursday's 10-year
highs. London Brent futures lost $1.80 to close at $32.75 a barrel and U.S.
light crude finished $1.79 easier at $33.60.
Iran, OPEC's second biggest supplier and traditionally an oil price hawk,
signaled that it would not block extra production.
``We do not seek exceedingly high oil prices nor do we seek to create an
artificial shortage of supply on the market,'' Iranian Oil Minister Bijan
Zanganeh said from Tehran.
Fuel Protests
Fuel protests in France and Spain and renewed calls in the United States for
a release of government petroleum stocks have highlighted a growing impatience
among OPEC's customers for the group to take strong action.
Finance leaders in the West, though, suggested that fears of another
1970s-style recessionary oil shock around the corner are misplaced.
Germany, rejecting calls for the government to drop plans to raise energy
taxes, said high fuel costs posed no threat because inflationary pressures in
other parts of the German economy were low.
And International Monetary Fund Managing Director Horst Koehler said of oil's
spike: ``It's casting a shadow on the outlook but I am confident the global
economy is strong enough to cope.''
Traders are doubtful that an extra 700,000 barrels daily from limits now of
25.4 million will be enough for a sustained move lower for prices ahead of the
winter.
Since most OPEC countries already are pumping to capacity, any significant
increase would have to come from leading producer Saudi Arabia.
Saudi Leaks
Saudi's Naimi said in New York earlier this week that Riyadh already was
pumping 600,000 barrels a day more than the allocation it was awarded in June.
And insiders said Saudi's share of extra OPEC supplies would come on top of
the leakage, taking the kingdom's output beyond nine million barrels a day for
the first time in nearly 20 years.
Industry observers say petroleum stocks in the West, particularly of heating
oil, are so low that unless the northern hemisphere has a very mild winter crude
prices may stay firm for some months to come.
They say OPEC was too slow earlier this year in easing the output
restrictions that carried prices from a 22-year low in 1998.
``They've left the market hostage to fortune,'' said Mehdi Varzi of Dresdner
Kleinwort Benson. ``But if they go for 700,000 bpd that at least should
undermine some of the market speculation.''
With inventories drained, refiners are loathe to do more than operate
hand-to-mouth, declining to rebuild stocks for the time being at such high
prices, hence perpetuating the shortages.
``The real worry is the shortage of petroleum product stocks,'' said Julian
Lee of London's Center for Global Energy Studies. ``More crude oil won't really
answer that problem.''
U.S. Reserves Option
If OPEC's third output rise this year, coming on top of a 2.4 million bpd
increment already, does not do the trick then attention will turn to U.S.
government policy on emergency stocks.
Congress is pressuring the Clinton administration to loan oil from the giant
571-million-barrel Strategic Petroleum Reserve (SPR) for sale on the open
market.
``The U.S. may have the last card to play with the SPR,'' said Gary Ross of
U.S. consultancy PIRA.
OPEC policy is under close scrutiny from finance ministers around the world.
European finance ministers, worried about economic performance in the
eurozone, at a meeting in Versailles called on OPEC to raise output.
Finance chiefs from Asia-Pacific Economic Cooperation (APEC) governments
meeting this weekend will examine the risk from rocketing oil import costs to
the region's strong economic recovery.
-- cpr (buytexas@swbell.net), September 08, 2000
I have to apologize. Earlier today I let charlie drag me down to his level. I even used all caps to call him a name. That was not professional. To be charitable, I'll assume that charlie misspoke himself in the slight warmth of a barely perceived moment of potential self-justification, rather than deliberately lied about other posters here, including myself. I'll also assume charlie's follow-up correction and apology aren't here only because of some Texas-sized computer glitch.
charlie still does not get it, and he doesn't get it so deeply and so significantly that I doubt he ever will. As I've said before, the current situation is more a political/economic shortage than physical shortfall. Right now, this year, the world can still pump and refine its way back to cheaper oil, and we may indeed see $25 oil again, especially if current high prices induce a recession. But it does give a taste of the near future. Even this relatively minor event has led to fuel rationing, blockades, nationwide protests, heating-oil problems, possible food shortages, fear of recession, and more political posturing than any human being should have to endure. If the past is prologue, eventually supplies will ease, tempers will cool, and nothing will be done to prepare for the next time and the time after that, until the time comes when all the oil pumping, refining and posturing in the world don't relieve the problem.
Oh, and charlie? You're still a dumb shit.
-- Cash (cash@andcarry.com), September 09, 2000.
