Oil soars as OPEC hawks hover over

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Mar 08 03:54 AM GMT Home: Business:Oil & Energy Oil soars as OPEC hawks hover over

Global oil prices could be above $35 a barrel by the northern hemisphere spring according to report.

March 07, 2000, 02:38 PM

LONDON (Reuters) - Oil galloped to new highs on Monday, overriding signs of easing OPEC output compliance as concerns over tight oil supplies ignited bullish sentiment.

Saudi oil minister plays balancing act Benchmark Brent crude coasted to $29.69 a barrel, its highest since the 1991 Gulf War, before ending at $29.65 for a 66 cent gain, more than three times sub-$10 lows hit just over a year ago. A monthly report by the US Energy Information Administration estimating that global oil prices could be above $35 a barrel by the northern hemisphere spring if OPEC delayed an output hike until the fourth quarter triggered a bull run after flagging following fresh intra-day highs.

If OPEC boosted output by 1.7 million barrels per day (bpd), prices could be around $25.50 by August, the EIA estimated.

The EIA also warned that the U.S. gasoline market was moving into "uncharted territory" due to tight stocks.

Shortly before the EIA report, a Reuters survey showed OPEC oil producers, excluding Iraq which is not party to a supply curbs deal, had eased compliance in February to 67 percent from 73 percent in January.

The OPEC 10 output cuts amounted to 2.882 million bpd in February from 3.162 million in January or 1.43 million short of the 4.32 million target for cuts established last March.

The survey indicated that OPEC was already producing the sort of extra volume that cartel doves would like to add to the market in April after an output deal expires at the end of the month.

Oil prices spiralled earlier in the day as cracks began to appear amongst OPEC members. Key producer Iran said there was no need for OPEC to raise output after March because demand would fall in the second quarter.

OPEC hawks hover over

Iranian Oil Minister Bijan Zanganeh said there was no reason for producers to increase output in the second quarter and blamed high prices on US political pressure on producers.

"We believe in safeguarding market stability and mutual interests of oil producers and consumers in the long-term. Hence we think market fundamentals and reality do not point to supply shortages," he said in remarks made available by his ministry.

"Prices would trend lower if the U.S. abandons its political pressures and measures." In a separate statement issued later with fellow price hawks Libya and Algeria, Iran said OPEC could keep output curbs after March because demand would fall by over three million barrels per day (bpd) in the second quarter.

The trio said in a statement that there would be no room for concern about price levels because the world would be entering a low demand season in the second quarter, adding they expected to meet before OPEC`s policy-making gathering on March 27.

US wants higher out put

Oil prices have tripled in the past year as a result of the output cuts orchestrated by the Organisation of the Petroleum Exporting Countries and non-OPEC producers such as Mexico.

The cuts, which expire at the end of this month, have severely drained oil inventories and created worries of a gasoline supply shortage in the United States just ahead of the summer driving season. The United States consumes a fifth of the world`s oil.

US Energy Secretary Bill Richardson has toured OPEC and some non-OPEC producers in recent weeks to argue for a swift increase in output, saying current shortages are unsustainable.

Richardson has also said releasing oil from the Strategic Petroleum Reserve was still an option being considered by the White House to tackle low supplies.

But he has not said when or if the reserve would be tapped.

The oil ministers of dominant OPEC power Saudi Arabia and Venezuela and key non-OPEC ally Mexico agreed in talks in London last week that there was a need to lift production to stabilise an overheated market.

But they said they had yet to decide how much more to pump and when to do it.

OPEC sources on Monday said OPEC producers saw global refinery demand rising by about 1.5 million barrels per day (bpd) in the second quarter of this year. ) 2000 Reuters

http://www.akhbar.com/article/0,1690,Business-15087,00.html



-- Martin Thompson (mthom1927@aol.com), March 07, 2000


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