Tuesday September 12 3:32 PM ET
Oil Prices Turn Lower, Europe Gets Angry

LONDON (Reuters) - Oil prices turned lower on Tuesday following an OPEC deal to hike output that failed to calm protests across Europe or stop panic buying in Britain that left petrol pumps dry.

Benchmark Brent crude oil on London's International Petroleum Exchange ended down $1.12 a barrel at $32.50 having hit a decade high of $34.60 last week and $34.37 earlier on Tuesday.

On New York's Mercantile Exchange benchmark crude was down 94 cents at $34.20 per barrel.

Oil dealers said the move lower was a correction after recent sharp gains and analysts said they expected prices to resume rising soon.

Truckers protesting against diesel prices blockaded highways across Western Europe.

On Sunday OPEC agreed to increase supplies now and act again if necessary. But the cartel's kingpin Saudi Arabia said it would not try to cool prices by flooding the market with discounted crude.

Nigel Saperia, an oil trader at Glencore in London saw little change in the market. ``We've had a $3 a barrel range recently and we're sitting in the middle of it,'' he said.

Soaring demand for heating oil ahead of the Western winter, depleted storage tanks and a scramble at the pumps in parts of Europe triggered panic buying in futures pits despite the OPEC deal.

In the short-term ``since crude inventories have largely been exhausted...the system as a whole has no choice but to balance supply and demand on a day-to-day basis,'' said Goldman Sachs in a recent review of energy markets.

``The only way to create this balance is through price moves large enough to force down demand in line with supply and rebalance the system,'' it said.

Protests Across Europe

Strong crude oil prices came as truckers protesting against fuel prices blockaded highways across Western Europe on Tuesday.

Dutch truckers staged wildcat blockades to stop traffic on motorways around Amsterdam and Rotterdam. About 60 taxi drivers forced a traffic slowdown on motorways around Amsterdam.

In London, petrol pumps ran dry after panic buying swept Britain. In the worst hit areas, rubbish went uncollected and hospitals canceled non-emergency services.

Britons pay more for petrol than other Europeans, squeezed by hefty fuel taxes and oil prices hitting a near 10-year high. Paradoxically, Britain is a big oil producer itself and the government has made windfall gains from high crude prices.

Anxious oil dealers dismissed efforts by OPEC producers to cool this year's rally as too little too late.

The Organization of the Petroleum Exporting Countries (OPEC) sealed a new production pact on Sunday, agreeing to hike output for the third time in seven months.

OPEC said it would review the market situation at an extraordinary meeting on November 12 and more oil could be available if necessary.

Some in the cartel said prices could be spinning out of control. ``We are approaching a crisis of great proportions because oil production capacity is reaching its limit,'' OPEC President and Venezuelan Oil Minister Ali Rodriguez said at the end of OPEC's two-day talks in Vienna.

``I don't think prices are going to get there now but they could rise to $40 depending on the winter,'' he added.

OPEC believes factors out of its control -- refinery bottlenecks, transport restrictions, high taxes in oil importing countries and speculation in financial markets -- are also to blame for rocketing energy costs.

World Economic Growth

Few economists expect surging energy costs to escalate from a price scare to a global economic shock like the oil crises of 1973 and 1979, noting world economies are now generally more diversified.

But some say world growth could begin to slow if prices remain above the $30 for some time.

The latest price run came amid fears that fuel supplies in the United States are stretched to breaking point. Fuel stockpiles are running at more than 20-year lows despite U.S. refineries operating at maximum capacity.

The United States, by far the largest single consumer soaking up one-quarter of total world petroleum, is already reeling from record-high gasoline prices this summer brought on by a shortage of a new ultra-clean grade of fuel.

Now a 40 percent national shortfall in heating oil stocks threatens to hit the pockets of American consumers this winter.

-- cpr (buytexas@swbell.net), September 12, 2000

Answers

Just admit it Creeper, you were WRONG. WRONG, WRONG, WRONG!!!

-- (creeper@the.moron), September 12, 2000.

We'll be feeling the effects of the coming oil crisis AFTER the election in November. Al the Bore will be high tailing it out of the country for meetings (a clever Clinton ploy) so he doesn't have to face the maddening crowd. Keep your eye on December and January especially in California when utility bills will double.

-- Aunt Doodah (Aunt Doodah@auntdoodahdayyy.com), September 12, 2000.

-- 1 (ana2@ana.3), September 12, 2000.