Oil falls more than a dollar ahead of Mideast summit October 16, 2000

SINGAPORE, Oct 16 (Reuters) via NewsEdge Corporation -

Oil prices dropped more than a dollar on Monday but stayed near 10-year highs after Saudi Arabia's offer of more crude supplies soothed a market tense over Palestinian and Israeli fighting.

U.S. President Bill Clinton and Middle East leaders will try to forge a ceasefire at a summit later on Monday following the worst Israel-Palestinian violence for decades.

Benchmark U.S. light sweet crude futures were down $1.25 per barrel at $33.74 a barrel at 0620 GMT, just a few dollars below the 10-year peak of $37.80.

``Right now it's coming off on Clinton going over for the peace talks, plus Saudi Arabia came out stating that if the market doesn't do any better they are going to...increase production,'' a New York-based broker said.

Prices were buoyed last week by the escalation in violence between Israel and the Palestinians with oil markets fearing the conflict would widen to other parts of the crucial oil producing region.

Perilously thin fuel stocks in the United States, the world's largest energy consumer, have raised worries of shortages this winter and left prices sensitive to any hint of supply disruptions.

OPEC COULD OPEN TAPS

Prices fell more than a dollar in trading on Friday after sources familiar with Saudi thinking said the kingdom would not consider suspending oil exports to punish U.S. support for Israel.

At the weekend, Saudi Arabia's oil minister, Ali al-Naimi dismissed such suggestions.

Oil prices quadrupled in the 1970s when various oil exporters deployed a mix of output cuts and export bans to punish Western support for Israel.

``Let us not talk about this subject. I don't see any use in such talk,'' Naimi said at an energy conference in the United Arab Emirates.

Kuwaiti Oil Minister Sheikh Saud Nasser al-Sabah also dismissed the embargo concerns.

Naimi also said the Organisation of the Petroleum Exporting Countries (OPEC) was concerned about the strength of prices and might act soon to stabilise the market.

He said OPEC could increase supply before an OPEC ministers meeting scheduled for November 12.

``Everything is possible, even before the meeting. This depends on the price,'' he said on the sidelines of an oil conference in the United Arab Emirates.

``Our aim is to get an average price of $25 a barrel.''

OPEC controls two-thirds of world crude exports and implemented an 800,000 barrel-per-day (bpd) production hike from October, its third rise in output this year.

But despite the increase in supplies, prices have remained stubbornly above $30 a barrel for much of the year.

With the memory of 1998's $10 per barrel oil still fresh, other OPEC members were worried an increase in supply now could spark a slump in prices early next year if demand declined.

Qatar's Oil Minister Abdullah bin Hamad al-Attiyah said the recent run up in prices was caused by the psychological impact of the Middle East tensions, not because supply and demand had grown any tighter.

``Everyone says that the increase in prices is due to psychological reasons. We should not rush. There is a big surplus in the market, about two million bpd is going into storage,'' he said.

Israeli Prime Minister Ehud Barak, Palestinian President Yasser Arafat, Egyptian President Hosni Mubarak, Jordan's King Abdullah and Clinton are due to start talks in Egypt later on Monday.

Israeli and Palestinian officials said the best anyone could hope for was an agreement to break the current cycle of Middle East violence -- the fiercest in more than a decade.

http://www.individual.com/story.shtml?story=d1016023.000

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