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11/08 15:53
Crude Oil Jumps After Saudi Calls for Steep Output Reduction
By Mark Shenk
New York, Nov. 8 (Bloomberg) -- Crude oil rose more than 5 percent after Saudi Arabia's oil minister said OPEC may try to bolster prices by cutting output quotas to the lowest level since the Persian Gulf War.
OPEC's goal is to defend oil prices, even if that means losing market share, Ali al-Naimi said at a conference in Morocco, Dow Jones Newswires reported. A crude oil index OPEC watches has dropped 33 percent since the Sept. 11 terrorists attacks as demand dropped from slowing world economies.
``He made it clear that for the Saudis and OPEC, price, not volume, is the most important issue,'' said Nauman Barakat, vice president of global energy trading at ABN Amro Inc. in New York. Al-Naimi's position ``reduces the chance of a price war over market share.''
Crude oil for December delivery rose $1.08, or 5.4 percent, to $21.17 a barrel on the New York Mercantile Exchange, the biggest gain since Sept. 14, the first trading day after the attacks. Prices are down 36 percent from a year ago, when oil was rising toward a 10-year high of about $36 a barrel.
In London, Brent crude oil for December delivery rose 95 cents, or 4.9 percent, to $20.28 a barrel on the International Petroleum Exchange.
Oil ministers from the Organization of Petroleum Exporting Countries are scheduled to meet in Vienna Wednesday to discuss making their fourth production cut this year. Non-OPEC exporters such as Mexico, Russia and Norway have declined to help in the production cutbacks.
Earlier than Expected
Any reduction would start Dec. 1, a month earlier than expected, said OPEC Secretary-General Ali Rodriguez, Dow Jones reported.
``Market pressures have forced them to act sooner rather that later,'' said John Kilduff, senior vice president of energy risk management for Fimat USA Inc. in New York. ``It indicates a new resolve on the part of OPEC to boost prices.''
A reduction of 1.5 million barrels a day would be ``an easy option'' for OPEC, al-Naimi said. Saudi Arabia is the biggest exporter and the most influential member of the 11-nation alliance.
``Moving up the date means that we will start seeing a reduction in shipments arriving here in January, when demand is strong,'' said Aaron Kildow, an energy analyst at Prudential Securities Inc. in New York. ``Previously, we thought we wouldn't miss shipments until February, when demand is lower.''
The suggestion from al-Naimi would lower OPEC's production targets to 21.7 million barrels a day, the lowest level since the end of the war in March 1991.
Above Quota
OPEC last month pumped 839,000 barrels a day more than its quota of 23.2 million, according to a Bloomberg survey of oil producers, oil companies and analysts.
Al-Naimi, who was in Morocco to attend a United Nations conference on climate change, said non-OPEC oil producers should cooperate by trimming output by 500,000 barrels a day.
Member states are talking about output reductions of between 1 million and 1.5 million barrels a day, said Rilwanu Lukman, Nigeria's top oil official, according OPEC's news agency. Nigeria is OPEC's fifth-largest producer. ``I suspect there will be a cut before the end of the year,'' he said.
Oil fell to around $10 a barrel in December 1998, and cooperation in production cuts by non-members such as Norway and Mexico helped double prices within nine months.
Such cooperation might be hard for OPEC to get this time ``because if OPEC cuts 1.5 million barrels, that alone will give support to prices,'' Kildow said. ``Producers such as Norway and Russia will have every incentive to keep exporting and see the benefit of high prices.''
Oil company share prices were mixed in late trading. Exxon Mobil Corp., the biggest publicly traded oil company, was 39 cents higher at $39.47. ChevronTexaco Corp. was down 22 cents at $87.06. |
