March 29, 2000

OPEC loosens taps but gas prices likely to stay high `They're very cautious . . . . They don't want the price to crash'

By John Deverell Toronto Star Business Reporter Despite all the hullabaloo about OPEC opening the taps, there will be no quick relief for those filling up at gas pumps.

After a month of staged struggle, OPEC oil ministers agreed yesterday to pump 1.45 million more barrels a day - about 7 per cent of OPEC quota - from the low-cost reserves of cartel members.

``They're very cautious at OPEC,'' observed Bob Clapp of the Canadian Petroleum Products Institute. ``They don't want the price to crash.''

The Organization of Petroleum Exporting Countries' second-biggest producer, Iran, taking a hard line, left the meeting in Vienna still arguing against a supply increase. The agreement also excludes the 11th member of the cartel, Iraq, which never was part of the original production cuts last year that sent prices surging. Continued tightness of crude supplies, and the reluctance of refiners to hold large quantities of expensive oil in storage, ``increase the potential for price spikes,'' warned Clapp, who speaks for Imperial Oil, Shell, Petro-Canada and other Canadian refiners.

The U.S. has only a 25-day supply of commercial oil, an historic low, ``and it's going lower as we speak,'' Clapp said. ``We don't know how the market works in this zone.''

Every $1 (U.S.) change in the barrel price of crude suggests an adjustment of 1 cent (Cdn) per litre at the pump.

West Texas Intermediate oil for May delivery dropped just 78 cents a barrel to $27 (U.S.) yesterday on the New York Mercantile Exchange.

The world consumes 75 million barrels of oil daily and OPEC countries supply about one-third of the total.

http://www.thestar.com/thestar/editorial/news/20000329NEW01b_FO-OPEC.html

-- Martin Thompson (mthom1927@aol.com), March 29, 2000