U.S Administration 'Nervous' About Oil Prices

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Tuesday May 16 12:00 PM ET Clinton Administration 'Nervous' About Oil Prices

WASHINGTON (Reuters) - The Clinton administration is ''nervous'' about a sharp increase that has pushed U.S. oil prices to $30 a barrel, but it is too early to determine if OPEC should increase its output, Energy Secretary Bill Richardson said on Tuesday.

``We are nervous about the spikes, about oil at $30 a barrel, after some initial (price) stability,'' Richardson told Reuters in an interview following a meeting of an Energy Department nuclear advisory panel.

``There is perhaps not the stability that we had all hoped for'' following OPEC's decision in March to increase oil output by about 1.7 million barrels per day, he said.

The Organization of Petroleum Exporting Countries (OPEC) should wait until the week before the cartel's scheduled June 21 meeting in Vienna, and look at market prices then to decide if another increase is necessary, he said.

Saudi Arabia's oil minister said earlier that it appeared OPEC did not need to raise production, but Richardson said it was ``too early'' to reach that conclusion.

Washington, which lobbied OPEC members last spring to pump more oil, will wait until early June to take a formal position on whether the cartel needs to increase output, he said.

If the current trend continues, Richardson said additional oil from OPEC may be needed to ease prices.

``It could be we may need more increased production,'' he said.

http://dailynews.yahoo.com/h/nm/20000516/ts/energy_clinton_1.html

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

Answers

Oil Rises Amid Word of No Output Hike

Story Filed: Tuesday, May 16, 2000 8:05 AM EST

LONDON (Reuters) - World oil prices rose further on Tuesday buoyed by a firm U.S. gasoline market and dwindling prospects of any imminent increase in supplies from the powerful OPEC producers' group.

North Sea benchmark Brent Blend futures for July delivery rallied to an intraday peak at $28.40 per barrel before settling back to $28.18 at 7:45 a.m. ET, a gain of 25 cents.

The June contract, which will expire at the close of business was 27 cents firmer at $28.60, while U.S. June benchmark futures hovered around the all-important $30 mark.

Already bullish oil prices received an additional boost in early dealings from Saudi Arabian comments that there was no immediate need to increase supplies to the market.

The kingdom is the world's biggest supplier of crude oil and the most influential member of the Organization of Petroleum Exporting Countries (OPEC).

Saudi Oil Minister Ali al-Naimi said most recent statistics showed there was no need for the cartel to pump more oil.

``But one always looks at the issue seriously and objectively. However at the present time we do not see any justification to think about raising production at the next June meeting,'' Naimi told reporters in Riyadh.

His comments mirror those of several other OPEC ministers in recent days although they have been at pains to emphasize no decision will be made until OPEC convenes in Vienna on June 21.

In March, nine OPEC members agreed to relax year-long output restrictions, which had led to big draws in world stockpiles and propelled prices to nine-year highs above $30 per barrel.

Iran, which had opted out of the deal, said it would increase its output anyway, taking the on-paper increase in OPEC flows to 1.7 million barrels per day (bpd).

OPEC also set in place a mechanism whereby it will automatically adjust supply by 500,000 bpd if the 20-day average price for the OPEC reference basket of seven crudes moves outside of a $22-$28 price band for more than 20 working days.

The 20-day average stood at $24.69 on Monday.

``This (price band) has not been exceeded,'' Naimi said on Tuesday. ``The price now is in the middle,'' he said.

ANALYSTS DON'T THINK RALLY WILL LAST

Speculative fund buying and concerns over a potential shortfall in U.S. gasoline supplies ahead of the U.S. peak summer driving season have lifted Brent from early April lows just above $21 following OPEC's output rise.

A new round of glitches at several U.S. refineries led U.S. benchmark gasoline on the New York Mercantile Exchange to jump almost three cents on Monday to near 97 cents per gallon.

The renewed run up in prices prompted U.S. Energy Secretary Bill Richardson on Friday to urge producers to consider further supply increases.

The United States, the world's largest oil consumer, earlier this year pressured OPEC into relaxing supply curbs to cool the runaway prices seen in March.

But some analysts have sounded a note of caution, uncertain about the fundamental basis for the current rally.

``We do not think that the market necessarily needs more OPEC crude in June, but that it needs the comfort of knowing that it will be there if it is needed,'' said Lawerence Eagles at London-based GNI Research.

``Overall we continue to see this market as a mirror to the dip below $22 seen in early April, and do not believe that the current strength will last,'' Eagles said in a daily report.

Copyright ) 2000 Reuters Limited

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


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