Singapore: Oil Prices Threaten 10-Year Peak

By Tanya Pang

SINGAPORE (Reuters) - Oil prices neared 10-year peaks on Wednesday, bolstered by fresh data showing a renewed fall in U.S. crude stocks, which offered little relief to fears of possible fuel shortages in the approaching winter. U.S. benchmark crude futures stood 57 cents higher at $37.08 a barrel in Asia. It traded at a high of $37.14, just one cent off the post-Gulf War peak earlier this week.

Prices, which took a breather from the recent bull run on Tuesday, found new upward momentum on weekly figures from the American Petroleum Institute (API) that indicated crude stocks in the United States were once again on the decline.

The API industry group said crude stocks fell two million barrels in the week to September 15 to almost 287 million barrels, more than 22 million barrels below year-ago levels.

Oil's recent rally to highs not seen since Iraq invaded Kuwait in 1990 has partly been driven by concerns that world inventories are too low to cope with any early cold snap in the upcoming Northern Hemisphere winter, especially in the United States, which consumes one-quarter of all petroleum supplies.

The API estimated that U.S. distillate inventories, which include the key heating oil product, rose a modest 1.25 million barrels to just over 116 million barrels and remain 28 million barrels under 1999 levels.

Analysts said the data could prompt a new assault on recent highs, although Wednesday's expiry of the October futures contract on the New York Mercantile Exchange (NYMEX) might spark volatility.

``The market will take (API figures) in stride and go along its merry bullish way,'' said Tom Knight with Redmeteor.com. ''This is like giving a drunk another drink.''

Pressure On Opec

So far, the recent output deal by the Organization of the Petroleum Exporting Countries (OPEC (news - web sites)) to boost world supplies by 800,000 barrels per day (bpd) from October has done little to ease stubbornly high oil. OPEC President and Venezuelan Oil Minister Ali Rodriguez said on Tuesday speculation was fuelling rocketing prices, which were out of the oil cartel's control.

He estimated that such speculation had added $8 to the value of a barrel of crude based on supply and demand. Rodriguez said oil at $40 a barrel could prompt ``emergency'' measures by OPEC, which controls 60 percent of global petroleum exports.

``The oil markets are not yet in an emergency situation, but they could become so,'' he said.

``If prices reach $40, it would without doubt be a delicate situation. If it is permanent, then it would be an emergency.''

OPEC believes it has done as much as it can to cap blistering prices with its latest output hike, the third this year, and blames current lofty levels on U.S. refinery bottlenecks, market speculation and high consumer government taxes.

The group is due to hold an extraordinary meeting to review the market on November 12. But several OPEC officials, including the world's biggest exporter Saudi Arabia, have said the cartel could jack up output ahead of the talks if prices stayed robust.

``If prices remain high, we don't need a meeting, we won't wait for a meeting. We'll act,'' OPEC Secretary-General Rilwanu Lukman told Reuters in Jakarta on Tuesday.

Oil At Top Of Consumers Agenda

Consuming nations such as the United States and European countries are pressuring OPEC to release more crude, fearing that a prolonged escalation of energy bills will spark inflation and dent global economic growth. European governments have faced a barrage of protests that have caused widespread chaos in recent weeks by consumers angry over high taxation levels.

The Group of Seven (G7) industrial nations are expected to put oil on the agenda at the weekend talks in Prague. President Clinton (news - web sites) said on Tuesday he wanted ``a few more days'' to assess market reaction to OPEC's latest output hike before deciding whether to take the rare step of dipping into the nation's 571-million-barrel Strategic Petroleum Reserve (SPR).

Oil from the reserve has only been used once -- a national emergency situation during the 1990-1991 Gulf crisis.

The oil price leap to post-Gulf War highs was partly driven by rising tensions between Washington and Iraq after Baghdad renewed accusations that Kuwait was stealing its oil, a similar charge to one it made before marching into the emirate in 1990.

The U.S. said it was ready to use military force if Iraq should threaten its neighbor again.

Kuwait said on Tuesday Iraq had launched the allegations against it to try and foil its plan to develop oilfields close to their mutual border.

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-- Carl Jenkins (Somewherepress@aol.com), September 20, 2000