01/11/2000 16:20 - (SA) SA calls for more oil Steven Swindells Johannesburg - Oil import-dependent South Africa on Wednesday urged Opec to again turn up its taps to alleviate acute fuel price increases in consumer nations.

The government called on Opec to act as Pretoria sanctioned yet another increase in pump prices, adding to the burden of motorists and industry which have had to endure a 30% increase in fuel prices since the start of the year.

"Production of crude oil has not increased significantly enough - it is still below the required levels," Minerals and Energy Minister Phumzile Mlambo-Ngcuka said in a statement.

"Through diplomatic channels, government has persistently engaged Opec to increase its production," she said.

Opec announced on Monday its fourth output rise this year but this has done little to bring crude back to below the $30 a barrel mark.

Opec states Saudi Arabia, Iran and Nigeria are South Africa's main crude suppliers and these purchases represent Pretoria's single largest foreign exchange expenditure despite a homegrown synthetic fuel indusry.

Mlambo-Ngucka's department implemented a two cents a litre rise in petrol prices on Wednesday, lifting the pump price to R3.74 ($0.49) a litre.

OIL THREATENS TO FAN INFLATION

Sustained fuel price hikes, due to higher world oil prices and heavy losses by the rand against the US dollar, have emerged as a major threat to government economic policy of containing consumer inflation to three-six percent by 2002.

Benchmark consumer inflation (CPIX) rose 8.1% in the year to September while the producer price index rose 9.4%, both spurred by higher oil prices.

Higher oil prices were a major factor behind the Reserve Bank's decision to raise its key interest rate last month by 25 basis points to 12.00%, the first rise since the emerging markets crisis of 1998. World oil prices rose again on Wednesday as renewed draws on US fuel stockpiles supported fears of shortages this winter.

Opec Presdident Ali Rodriguez on Tuesday said oil was likely to stay above the cartel's upper target of $28 a barrel until the end of the first quarter of 2001 and only begin to fall after the northern hemisphere winter.

Hefty pump price hikes also threaten to emerge as a key issue in December local elections.

The opposition, white-led Democratic Alliance has used the fuel situation as a stick to beat the ruling African National Congress (ANC) arguing that the ANC has overseen a 123% increase in pump prices since it came into power in 1994.

The Inkatha Freedom Party, which has seats in the cabinet of President Thabo Mbeki, called on the government to cut its fuel taxes to alleviate the burdens on the country's poor.

Close to 10 000 petrol pump attendants are threatening to go on strike from next week to press for higher wages. Taxi drivers marched to the president's offices last month to protest against higher fuel costs and a government shake-up of the industry. OIL COMFORTABLY ABOVE $30

On London markets oil prices simmered comfortably above $30 a barrel on Wednesday after a surprise drop in US fuel stockpiles fanned fears of shortages this winter and pushed OPEC's latest production increase to the backburner.

Fresh weekly industry figures showing declines in US crude and gasoline inventories ran counter to market expectations and prompted a bout of buying by edgy traders.

Brent blend crude futures for December traded 42 cents a barrel higher at $31.15 while US benchmark light sweet crude futures gained 38 cents to $33.08 a barrel.

Markets seemed to shrug off Opec's attempt to rein in oil prices with its fourth output hike this year, as oil bubbled stubbornly above the $30 a barrel level widely seen as unacceptable to producers and consumers.

Wafer-thin fuel stocks in the United States, the world's biggest consumer, ahead of the peak-demand winter season and rumbling tensions in the Middle East have kept oil buoyant despite the steady rise in Opec production.

"Some of the recent price strength is attributable to sentiment rather than supply shortages," Standard Bank in London said in a market commentary, noting particularly the recent violence between Isreal and Palestine and tensions with Iraq.

"The bad news is that against this background crude supplies are gradually being stepped up. This is the wrong medicine for high prices and a potion which is likely to have repercussions next spring," it added.

Price hawks in the Organisation of the Petroleum Exporting Countries have said oil prices could fall precipitously at the end of the northern hemisphere winter, when demand from the giant US market slackens.

US STOCKS IN SHOCK DROP

US oil stockpile data from the American Petroleum Institute (API) released late on Tuesday showed a 4.9 million barrel draw in gasoline inventories in the week to October 27, catching the market off guard.

The draw deepened gasoline's deficit against last year to 8.1 million barrels and was much larger than the one million barrel decline forecast by most analysts.

The API said crude stocks were off 749 000 barrels to 281.7 million barrels, going against expectations of a three million barrel rise and bringing levels nearer to 24-year lows.

Some supply comfort came from a 1.7 million barrel rise in distillate inventories including heating oil, which many analysts had feared could be in shortage this winter.

But US distillate stocks remain 26 million barrels in deficit versus this time last year.

OPEC SETS NEW PRICE CLOCK TICKING

After swinging into action with an output hike of 500 000 bpd under an automatic price band agreement, Opec reset its 20-day clock on the mechanism on Tuesday, Rodriguez said.

Under an informally agreed pact between members, a half a million bpd output rise is automatically triggered if the price of Opec's reference basket of crudes stays above $28 a barrel for 20 consecutive working days.

The hike, which took effect on Tuesday, was the cartel's latest attempt to rein in sky-high prices that have raised fears of denting world economic growth by stoking inflation.

Only one day after the increase, South Africa became the first nation to call for still more crude.

But the United States expressed satisfaction with the move.

"We think it will help stabilise the market," US Secretary of Energy Bill Richardson said on Tuesday. "We believe we have averted a problem. We are satisfied."

The latest output increase has had little impact on prices because traders are sceptical that it will translate into extra physical barrels on the market, rather than simply legitimising existing quota violations.

Asia crude traders said on Wednesday they were poised to take more oil from Opec members mainly in the Middle East, but had yet to receive any firm offers.

http://news.24.com/News24/Finance/Markets/0,1466,2-8-21_934384,00.html

-- Martin Thompson (mthom1927@aol.com), November 01, 2000