IN THE NEWS / OPEC delays action on price woes
Calgary Herald, and Reuters
World oil prices languished near 12-year lows Thursday after OPEC put off tough decisions until 1999 on how to rescue glutted crude markets.
Canadian analysts say the cartel's non-action means there is little light at the end of the tunnel for oil producers battered by weak prices.
"It's not welcome news to oil producers,'' said Jim Oosterbaan, a vice-president at Ziff Energy Group consultants in Calgary.
"It's probably recognition that OPEC doesn't have the influence it used to have."
The Organization of the Petroleum Exporting Countries ended its biannual meeting in Vienna Thursday, saying decisions on output cuts had been put off until next March.
World benchmark Brent crude oil futures dipped slightly after the news but then recovered, closing six cents higher at $10.96 US a barrel for January delivery.
The New York Mercantile Exchange was closed Thursday for the U.S. Thanksgiving holiday after West Texas Intermediate oil closed at 11.86 a barrel on Wednesday
"They could have papered over the cracks, but they didn't even do that," said Nigel Saperia of Bankers Trust in London. "Are we going to see $10 a barrel? Possibly."
The problem for the industry continues to be weak demand for crude and a production glut that has affected markets for more than a year.
OPEC and non-OPEC countries have already agreed this year to trim about three million barrels of daily production
Given current economic conditions, it was unlikely they could sustain further reductions, said Judith Dwarkin, vice-president of global energy for the Canadian Energy Research Institute in Calgary.
Unless a cold winter draws down surplus supplies, oil prices will likely average $14.50 to $15 US per barrel next year and could be "quite brutal" during the first half of 1999, she predicted.
"Over the next year, there won't be much joy if you are a producer,'' Dwarkin said. "It means producers have to batten down the hatches and try and take a longer-term view.''
Oil and gas analyst Gord Currie of Canaccord Capital Corp. in Calgary said there was little expectation going into the meeting of a major breakthrough.
"It just means continued uncertainty for the price of oil,'' he said. "It means there's going to be a lot less drilling in Canada in the next few months."
Canada's largest oil producers such as Ranger Oil Ltd. and Anderson Exploration Ltd. have already slashed exploration budgets for next year due to reduced cash flow.
Winter in the Western consuming nations will boost oil demand temporarily, but the seasonal downturn in buying next spring could leave storage tanks dangerously near the rim by summer, said leading traders.
OPEC had agreed in June to cut output by about 10 per cent until the middle of next year.
But in recent months, familiar allegations that some cartel members such as Venezuela and Iran were cheating on pledged cuts were beginning to undermine the group's pact.
Lynchpin Saudi Arabia insisted in Vienna that members adhere to their existing promises to cut supply before any new measures to cut output could be considered.
The once mighty oil producers' cartel has been shocked by the huge drop in oil prices that has driven Brent to an average of $13.66 so far this year, the lowest average since 1976.
Outgoing OPEC President Obaid Bin Saif al-Nasseri said Thursday, "The early signs are that our member countries petroleum revenue for 1998 could be as much as a third lower than they were last year." |
