FOCUS-Oil forges above $21 to new 22-month highs
Reuters Story - August 20, 1999 08:10
(updates with London prices, PVS SINGAPORE)
By Andrew Mitchell
LONDON, Aug 20 (Reuters) - Oil prices bolted to fresh highs above $21 a barrel on Friday as OPEC's determination to stick with deep output cuts kindled fears of a winter supply crunch as stocks of spare oil shrink.
International benchmark Brent crude in London powered to a high of $21.11 on Friday -- its highest since October 1997 -- before slipping to $21.03 by 1130 GMT, a 13 cents rise over the day.
The gains will further buoy OPEC ahead of its September 22 ministerial meeting. The group's success, with non-OPEC Mexico, in keeping up supply curbs agreed in March has hoisted prices from historic sub-$10 lows just six months ago.
Still nursing their economies back to health after last year's slump, OPEC producers like Algeria, Iran and Libya have said September's meeting will not loosen supply limits, as global stockpiles of spare oil are still too high for comfort.
Yet some analysts warn that the tight grip on supply will soon slash surplus stocks and could create a supply shortage in the peak northern hemisphere winter demand season.
This has encouraged speculators to buy in anticipation of further price gains. "I think the funds are quite happy to stay long with the fourth quarter just round the corner," said one London dealer.
Potential fallout from the Y2K computer bug could also cut into oil flows at the turn of the year, analysts add -- a fear that will increase buying pressure in the autumn and winter as consumers hoard precautionary supplies of heating oil.
News that a tropical storm was drifting towards Mexican oil facilities reminded traders that the approaching Atlantic hurricane season could further disrupt oil supply in the Americas.
Tropical storm Brent is currently heading westwards towards Veracruz state, home to one of Mexico's two main Gulf oil export terminals. It was forecast to make landfall in 48 to 72 hours, forecaster Weather Services Corp said on Friday.
A huge fire at Turkey's biggest refinery that blazed since Tuesday's devastating earthquake has also forced it to cancel some shipments of refined products. The fire, at the Izmit plant, was finally brought under control on Friday.
The latest gains have pushed price further above producers' declared $18-20 target range for Brent. OPEC's startling success in reviving prices has now shifted debate onto how long its supply cuts should stay in place.
Some experts say that further price rises will only serve to unleash higher cost production outside OPEC ranks and ultimately cause the same sort of disastrous price collapse that afflicted OPEC economies last year.
Prices in dollars a barrel:
Aug 20 Aug 19
(1130 GMT) (close)
IPE Oct Brent 21.03 20.90
NYMEX Oct light crude 22.06 21.97
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