Crude prices rise sharply Lower crude inventories boost U.S. oil futures to more than $28 a barrel August 2, 2000: 2:13 p.m. ET

NEW YORK (CNNfn) - Crude oil prices were sharply higher midafternoon Wednesday after a closely monitored report from the American Petroleum Institute indicated a sharp fall in petroleum reserves.

The American Petroleum Institute (API) said late Tuesday that U.S. oil inventories declined by nine million barrels, confounding analysts' forecasts that higher imports would result in a one-million-barrel increase.

U.S. light sweet crude futures for September delivery rose 69 cents to $28.48 a barrel on the New York Mercantile Exchange. London's benchmark Brent for September delivery rose 64 cents to $27.40.

OPEC has said that it will increase its output if the price of its basket of different oil types stays above $25 a barrel. The oil cartel supplies around 40 percent of the world's crude.

Analysts warned, however, that early stock figures are notoriously unreliable and are often subject to revision.

"The market is so volatile at the moment ... the one thing the oil market desperately needs at the moment is clarity from OPEC, and it's not getting it," Julian Lee, a senior strategist at the Center for Global Energy Studies, told CNNfn.com.

The cost of a barrel of crude oil has come down from more than $30 in the past few weeks as traders anticipated a glut of product coming on to the market. However, there is some dispute among oil market participants, not least among OPEC members themselves, as to the underlying balance of demand and supply in the world economy.

Some OPEC hawks, notably Iran, have indicated their concern that oil prices could crash again if too much supply comes on to the market. The price of a barrel of oil fell in early 1999 as low as $10.

Large oil-consuming nations, such as the United States, want a stable oil price around $25 to prevent a global economic crunch. Big producers, such as Saudi Arabia, OPEC's largest producer, have said they share that goal, which aims to avert a renewed drive to exploit alternative energy sources.

http://cnnfn.cnn.com/2000/08/02/worldbiz/oil/

-- Martin Thompson (mthom1927@aol.com), August 02, 2000