Oil Holds Above $31 As Mideast Simmers

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Oil Holds Above $31 As Mideast Simmers October 23, 2000

LONDON (Reuters) via NewsEdge Corporation -

High oil prices held steady on Monday as Middle East tensions simmered and markets resting on wafer-thin surplus stocks readied for a surge in winter demand.

International benchmark Brent crude for December delivery settled 47 cents higher at $32.08 a barrel, surging on renewed Middle East tensions.

U.S. December light crude was 81 cents firmer at $33.76.

World oil production -- at full tilt everywhere outside Saudi Arabia -- has little margin for error ahead of a northern hemisphere winter that will see the highest demand in history.

U.S. fuel stockpiles, apparently at their lowest in almost a quarter of a century, have left many wondering if U.S. homes and offices will stay warm if the winter is especially severe.

And Middle East tensions are adding extra pressure on nerves in a supply system operating with little slack.

``There is no change in sentiment. The market is keeping one eye on Middle East developments,'' said Tony Machacek of brokers Prudential Bache. ``It's one of the unknowns.''

Renewed Israeli-Palestinian clashes pushed Brent futures up 90 cents to $31.62 a barrel on Friday, while U.S. oil prices jumped by more than a dollar.

Although Middle East violence has abated from its peak last week, prices may rise further if the unrest boils over again.

Palestinian gunmen opened fire on the Jewish settlement of Gilo, considered by Israel to be a neighborhood of Jerusalem, despite warnings by the Israeli army that they would surround the West Bank town of Beit Jala to stop the attacks.

Machineguns mounted on Israeli tanks returned fire, witnesses said.

``If the danger against the residents of Gilo continues, we will take further steps and today already we will surround Beit Jala,'' army chief of staff Shaul Mofaz told Israel Radio.

Elsewhere, no one was wounded in a ``very powerful'' roadside bomb attack against a convoy of Israeli cars driving from the Jewish settlement of Netzarim in the Gaza Strip.

Clashes continued sporadically elsewhere in the more than three-week-old wave of violence between the Israeli army and Palestinians.

Palestinian medical sources said two more Palestinians had died of wounds sustained last week, taking the death toll in the wave of violence to at least 127, all but eight of them Arabs.

Israeli Prime Minister Ehud Barak said his government would take a pause from peacemaking after an Arab summit in Cairo used what he called threatening language against Israel.

U.S. Ambassador to Israel Martin Indyk has warned Palestinians against unilaterally declaring an independent state, saying it could light a fire that would engulf the Middle East.

Palestinians plan to establish an independent state as early as November 15.

OPEC UNDER RENEWED U.S. PRESSURE

The market is watching the deadline for the Organization of the Petroleum Exporting Countries (OPEC) to boost production under a mechanism designed to keep prices stable.

Under the terms of the mechanism, OPEC will release an extra 500,000 barrels per day (bpd) if OPEC's reference basket of crudes remains above $28 for 20 consecutive working days.

That deadline will arrive on Friday, but the order for the release of extra barrels will not be formally triggered until Monday because of a one-day delay in calculation of the basket by the group's Vienna headquarters.

Saudi Arabia and other OPEC members would back a 500,000 bpd hike at the end of the month as long as prices remain above the $28 threshold, a senior OPEC delegate said on Monday. That would be rather than waiting for a policy-making meeting on November 12 in Vienna.

``Some OPEC countries, including Saudi Arabia, will back a hike,'' the delegate said.

``OPEC has an agreement. If we do not stick to this agreement, our credibility will be damaged,'' he added.

``If OPEC comes out and says we are increasing production by half a million barrels, the price could lose a dollar or two. It all depends on whether the market had been going up or (was) under pressure at the time,'' said Machacek.

OPEC is facing renewed pressure from the United States, which wants extra supplies from the cartel to ease prices.

High fuel costs have become an explosive issue during the U.S. election year and politicians want to reassure Americans that heating oil supplies will be adequate in the peak demand winter season.

U.S. Energy Secretary Bill Richardson met OPEC President and Venezuelan Oil Minister Ali Rodriguez in Caracas on Saturday to seek a further production hike from the group.

But Richardson failed to win a concession from Rodriguez, who told a news conference that OPEC was committed to taking decisions unanimously and implementing the price band mechanism.

Copyright B) Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

LONDON (Reuters) via NewsEdge Corporation -

High oil prices held steady on Monday as Middle East tensions simmered and markets resting on wafer-thin surplus stocks readied for a surge in winter demand.

International benchmark Brent crude for December delivery settled 47 cents higher at $32.08 a barrel, surging on renewed Middle East tensions.

U.S. December light crude was 81 cents firmer at $33.76.

World oil production -- at full tilt everywhere outside Saudi Arabia -- has little margin for error ahead of a northern hemisphere winter that will see the highest demand in history.

U.S. fuel stockpiles, apparently at their lowest in almost a quarter of a century, have left many wondering if U.S. homes and offices will stay warm if the winter is especially severe.

And Middle East tensions are adding extra pressure on nerves in a supply system operating with little slack.

``There is no change in sentiment. The market is keeping one eye on Middle East developments,'' said Tony Machacek of brokers Prudential Bache. ``It's one of the unknowns.''

Renewed Israeli-Palestinian clashes pushed Brent futures up 90 cents to $31.62 a barrel on Friday, while U.S. oil prices jumped by more than a dollar.

Although Middle East violence has abated from its peak last week, prices may rise further if the unrest boils over again.

Palestinian gunmen opened fire on the Jewish settlement of Gilo, considered by Israel to be a neighborhood of Jerusalem, despite warnings by the Israeli army that they would surround the West Bank town of Beit Jala to stop the attacks.

Machineguns mounted on Israeli tanks returned fire, witnesses said.

``If the danger against the residents of Gilo continues, we will take further steps and today already we will surround Beit Jala,'' army chief of staff Shaul Mofaz told Israel Radio.

Elsewhere, no one was wounded in a ``very powerful'' roadside bomb attack against a convoy of Israeli cars driving from the Jewish settlement of Netzarim in the Gaza Strip.

Clashes continued sporadically elsewhere in the more than three-week-old wave of violence between the Israeli army and Palestinians.

Palestinian medical sources said two more Palestinians had died of wounds sustained last week, taking the death toll in the wave of violence to at least 127, all but eight of them Arabs.

Israeli Prime Minister Ehud Barak said his government would take a pause from peacemaking after an Arab summit in Cairo used what he called threatening language against Israel.

U.S. Ambassador to Israel Martin Indyk has warned Palestinians against unilaterally declaring an independent state, saying it could light a fire that would engulf the Middle East.

Palestinians plan to establish an independent state as early as November 15.

OPEC UNDER RENEWED U.S. PRESSURE

The market is watching the deadline for the Organization of the Petroleum Exporting Countries (OPEC) to boost production under a mechanism designed to keep prices stable.

Under the terms of the mechanism, OPEC will release an extra 500,000 barrels per day (bpd) if OPEC's reference basket of crudes remains above $28 for 20 consecutive working days.

That deadline will arrive on Friday, but the order for the release of extra barrels will not be formally triggered until Monday because of a one-day delay in calculation of the basket by the group's Vienna headquarters.

Saudi Arabia and other OPEC members would back a 500,000 bpd hike at the end of the month as long as prices remain above the $28 threshold, a senior OPEC delegate said on Monday. That would be rather than waiting for a policy-making meeting on November 12 in Vienna.

``Some OPEC countries, including Saudi Arabia, will back a hike,'' the delegate said.

``OPEC has an agreement. If we do not stick to this agreement, our credibility will be damaged,'' he added.

``If OPEC comes out and says we are increasing production by half a million barrels, the price could lose a dollar or two. It all depends on whether the market had been going up or (was) under pressure at the time,'' said Machacek.

OPEC is facing renewed pressure from the United States, which wants extra supplies from the cartel to ease prices.

High fuel costs have become an explosive issue during the U.S. election year and politicians want to reassure Americans that heating oil supplies will be adequate in the peak demand winter season.

U.S. Energy Secretary Bill Richardson met OPEC President and Venezuelan Oil Minister Ali Rodriguez in Caracas on Saturday to seek a further production hike from the group.

But Richardson failed to win a concession from Rodriguez, who told a news conference that OPEC was committed to taking decisions unanimously and implementing the price band mechanism.

Copyright B) Reuters Limited.

http://www.individual.com/story.shtml?story=c1023164.103

-- Martin Thompson (mthom1927@aol.com), October 23, 2000


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