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Wed, 06 Sep 2000, 10:53pm EDT Crude Oil Breaches $35 a Barrel as OPEC Supply Seen Too Low By Mark Shenk

Singapore, Sept. 7 (Bloomberg) -- Crude oil rose above $35 for the first time since the Persian Gulf War in 1990 on speculation any output increase by OPEC this weekend will be too small to meet demand and replenish inventories.

The U.S. Energy Department today projected that growing demand, especially in Asia, will keep world inventories low through next year, leaving oil markets vulnerable to supply disruptions.

``Relative to any point in the last 20 years I have never seen supply and demand as tight as it is today,'' said Roger Plank, chief financial officer at Apache Corp., a Houston-based oil and natural-gas exploration company. ``You could see some significant'' price surges to $40-$50 a barrel.

Crude oil for October delivery rose as much as 29 cents, or 0.83 percent, to $35.19 a barrel in electronic trading on the New York Mercantile Exchange, the highest closing price since Nov. 9, 1990. The all-time high was $41.15 a barrel on Oct. 10, 1990.

The Organization of Petroleum Exporting Countries has an informal agreement to raise output quotas by 500,000 barrels a day if its benchmark price stays above $28 a barrel for 20 consecutive days. That milestone could be reached on Friday, two days before the group meets in Vienna to discuss production levels. The price was $32.50 a barrel yesterday.

10-Year Highs

In London, Brent crude oil for October settlement rose $1.30, or 3.9 percent, to $34.28 a barrel on the International Petroleum Exchange, also the highest closing price since November 1990. Brent prices have been at or close to 10-year highs for the past week.

French truckers protesting high prices blockaded refineries for a fourth day, creating gasoline shortages, and farmers are threatening similar protests in Spain.

``We would like prices to go down,'' said Thierry Desmarest, chairman of Total Fina Elf SA, France's biggest oil company, after the company reported profit in the first half of the year more than doubled.

``It's not good for economic development, and I understand perfectly well (some of our customers) are facing considerable difficulties.''

Share prices of U.S. oil companies rose along with crude oil. Exxon Mobil Corp., the world's largest publicly traded oil company, rose 63 cents to 84, and Chevron Corp., the No. 2 U.S. oil company, rose 2.19 to 88.13. Both companies said in July that second-quarter earnings more than doubled to records because of surging energy prices.

Low Inventories

U.S. inventories of crude oil are down 7 percent from a year ago at 289.1 million barrels, while supplies of heating oil are down 38 percent, according to a report from the American Petroleum Institute released after trading yesterday.

The Energy Department, in a monthly report, projected growth in world inventories of 700,000 barrels a day this year, not enough to make up an 800,000-barrel-a-day drop last year.

OPEC meets Sunday to consider a third output boost of the year. Its two past efforts failed to stem the market's advance, and oil prices have gained by one-third this year.

Saudi Arabia said it wants to see lower prices. The world's top producer increased daily output by 600,000 barrels since July and is committed to a price of $25 a barrel, Dow Jones Newswires reported, citing the country's oil minister, Ali al-Naimi.

Prices rose even after al-Naimi's remarks.

``Why should people listen to the Saudis? Inventories are still very low,'' said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons in St. Louis. ``We're in a put-up-or-shut-up mode,'' he said. ``Until the oil starts pouring in, they will be ignored.''

High Taxes

The Saudi crown prince said consuming nations were partially responsible for high oil prices.

``I would like also to note the important role which the consuming countries should play,'' he said in remarks released yesterday by the official Saudi Press Agency. ``Their domestic taxes on oil constitute a heavy burden on consumers, and they should reconsider the rate of those taxes.''

The European Union today warned its member governments not to cut taxes on gasoline in an effort to lower fuel prices, saying such a move could be illegal and would give oil producers no incentive to reduce prices.

U.S. Energy Secretary Bill Richardson said he hopes OPEC will ``seriously consider'' increasing oil production to bring stability to the global market. He said the U.S. is seeking a stable price for oil of $20 to $25 per barrel and that prices of $34 a barrel are ``unacceptably high.''

U.S. retail gasoline prices last week rose for the third straight week, rising to $1.53 a gallon, the DOE said yesterday.

Wholesale gasoline for October delivery rose 3.09 cents, or 3.2 percent, to 99.8 cents a gallon on the Nymex. Prices are up 50 percent from a year ago.

http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial%20News&s1=blk&tp=ad_topright_topfin&T=markets_bfgcgi_content99.ht&s2=blk&bt=blk&s=AObbt1RNQQ3J1ZGUg

-- Martin Thompson (mthom1927@aol.com), September 06, 2000

Answers

An important barrier, the $35 mark, has been breached. Now it's only a matter of how high?

-- Billiver (billiver@aol.com), September 06, 2000.

Thursday, 7 September, 2000, 01:23 GMT 02:23 UK Oil breaks $35 barrier

Saudi Arabia is thought to favour an output rise

Oil prices surged to a new 10-year high on Wednesday as traders took the view that leading producers will not boost production by enough to ease a continued supply shortage. In after-hours trading in New York, crude oil futures broke the $35 mark, the highest level since 1990, when Iraq invaded Kuwait.

Prices peaked at $35.19 a barrel before retreating to $34.97.

Earlier in London trade, it hit a decade-high $33.56, closing at $33.45.

Analysts said traders were panicking ahead of a planned meeting on Sunday in Vienna of the Organisation of Petroleum Exporting Countries (Opec) in which output levels are due to be discussed.

They said traders did not feel Opec would do anything significant to reduce prices.

At an Opec policy meeting, Iranian Opec governor Hossein Kazempour Ardebili,said the markets would not justify an increase in output of more than 500,000 barrels per day.

Informal agreement

Opec producers have already agreed informally to raise output by 500,000 barrels a day if prices stay above $28 a barrel for 20 consecutive working days.

But traders said raising production by this amount would be insufficient to calm the market and they feared Opec would not agree to pump any more than that.

The world's largest oil producer and exporter Saudi Arabia - which is a key Opec member - has indicated that it would favour a collective output rise by the cartel of more than 500,000 barrels a day.

And it has been lobbied hard by the United States government to deliver this.

The EU also entered the fray on Wednesday, calling for Opec to push through a "substantial increase" in output and help drive down to prices to about $20 a barrel.

The EU's energy commissioner Loyola de Palacio said she was worried by the "explosion" in oil prices which had caused inflation in the EU to rise by 1% and threatened worldwide economic growth.

Traders said they would be watching for any signals that might emerge from a meeting between US President Bill Clinton and Saudi Arabia's Crown Prince Abdullah scheduled for later on Wednesday.

So far, Saudi officials have held back from pushing publicly for a large output rise for fear of alienating other Opec members ahead of the summit.

Some Opec members, including the summit host Venezuela, are strongly opposed to any substantial output rises which they say could provoke a damaging price slump.

Price hype

Saudi Petroleum and Mineral Resources Minister Ali Naimi said in New York on Tuesday that he saw no problem in putting extra oil into the market.

But he qualified his comments by saying that supplies were not as tight as prices suggested.

"A lot of this price is hype," he said.

Some other Opec states also argue that the oil price rises are partly the responsibility of refiners, saying the market is being moved by tight supplies of refined products such as heating oil rather than any shortage of crude oil.

The world's largest oil consumer, the US, has not been mollified by Opec statements and has repeatedly urged the organisation to release more supplies.

http://news.bbc.co.uk/hi/english/business/newsid_913000/913049.stm

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

And, the battle of words goes on. And, on and on and ?

-- QMan (qman@c-zone.net), September 07, 2000.