Wednesday, August 23, 2000 High oil prices worry EU

THE European Union (EU), worried by increasing inflation rate in the Euro zone, has formally urged the Organisation of Petroleum Exporting Countries (OPEC) to check the upsurge in oil prices.

In a telephone chat with the cartel's president Ali Rodriguez, European Energy Commissioner Loyola de Palacio pointed out that the rise in oil prices was "leading to great volatility and that the effect is neither positive for the producer countries or for the industrialised countries."

Oil, which has remained at over $30 a barrel despite OPEC's efforts this year to ease prices via higher output, is being blamed by policymakers for a spike in euro zone inflation to above two per cent limit set by the European Central Bank (ECB).

The Commission forecast in March inflation averaging 1.8 per cent this year but said last week the forecast had become doubtful because oil was much higher than a $24.2 average level it had assumed when drawing up its projection.

The ECB is due to hold its first rate-setting meeting after its summer break on August 31 amid widespread market expectations.

Palacio reportedly asked Venezuela to try and moderate its stance on oil prices so as to have more reasonable prices.

EU spokesman said the initiative was taken in coordination with the United States Energy Secretary Bill Richardson.

A source said Rodriguez who is also Venezuela's Energy and Mines Minister had told Palacio that OPEC had taken some measures and was aware of the problem. "He told Palacio the EU's view would be taken into account," the source said.

OPEC has agreed on a mechanism to boost output should the price of oil remain above $28 for more than 20 working days. It is also due to review its current production ceiling at a meeting on September 10.

When asked what the Comission meant by a "reasonable level" for oil, the EU spokesman noted that most observers considered a price around $25 to be justified and noted OPEC's own $28 limit.

October Brent crude futures were up around $30.85 yesterday as a hurricane threat to a Caribbean refinery, the largest in the West, added to fears about tight U.S. stocks..

http://www.ngrguardiannews.com/news2/nn795509.html

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