Crude Oil Prices to Rise Further in 1999 as Inventories Fall, Analysts Say
New York, Sept. 23 (Bloomberg) -- Crude oil prices, after
doubling this year, will rise further in the coming months as
global inventories continue to fall, analysts said.
Oil, which closed at $24.12 a barrel yesterday in New York,
will probably peak in November at almost $28 a barrel, the
highest level since 1990, according to a Bloomberg survey of
analysts, traders and economists.
``It's very difficult to put any kind of brakes on this
market,' said Nauman Barakat, vice president of global energy
trading at ABN Amro Inc. in New York, who expects oil to fetch
almost $30 a barrel by February.
More than 18 months of production cuts by the Organization
of Petroleum Exporting Countries and other producers have helped
erode a glut of oil, trimming world supply by more than 5 million
barrels a day. OPEC ministers voted yesterday to maintain those
quotas through March.
Crude oil probably will top out at $27.63 a barrel on Nov.
17, according to an average estimate of eight analysts surveyed
by Bloomberg. By Jan. 1, prices will fall to $23.91 a barrel, the
analysts said. That's up from a 12-year low of $10.35 a barrel in
December 1998.
Today, Brent crude oil for November delivery jumped as much
as 43 cents, or 1.9 percent, to $23.36 a barrel in London, its
highest price since January 1997.
Few expected the rally to last this long, mostly because
OPEC failed to limit production for years as members pumped all
they could to protect their share of the world market. Instead,
they've found that they're making more by pumping less.
``Everybody said, `You can't trust these guys. The bull
market is going to fall apart,' said Bill O'Grady, vice
president, director of fundamental futures research, at A.G.
Edwards & Sons in St. Louis. ``People thought it was ridiculous,
but it was for real.'
Inventories Dropping
Imports and inventories have fallen to 20-month lows in the
U.S. At the same time, Americans are paying more at the pump for
gasoline. The national average for regular gasoline reached a
three-year high of $1.268 a gallon last week, according to the
U.S. Department of Energy.
Not everyone expects the rally to continue. Tom Blakeslee, a
trader at Eildon Marketing LLC in White Marsh, Maryland, says the
top's already in for the year because producers will be unable to
resist the temptation to pump more oil at higher prices.
Recent comments by Venezuelan President Hugo Chavez
demonstrate how sensitive the market is to any hint that
production could rise.
Chavez in a speech last week said that prices have risen far
enough and OPEC should consider increasing supply. His remarks
sent prices in New York down about 75 cents, or 3 percent, before
he gave another interview, in which he said Venezuela had no
plans to increase production.
``There may be an overreaction in both directions,'
Blakeslee said. ``Twenty-five (dollars) is too high and $10 is
too low.'
Cheating?
Barakat argues that the price rise is almost assured because
the Persian Gulf Arab nations -- Saudi Arabia, Kuwait and the
United Arab Emirates -- won't cheat on their output quotas. The
Iranians and most other OPEC nations are pumping at capacity, he
said.
The Nigerians won't cheat because their new oil adviser,
Rilwanu Lukman, helped create the agreement to cut production and
would suffer international embarrassment if the nation ignored
its quota, said Barakat, an OPEC observer who has attended
several meetings.
Venezuela, until recently one of the worst members at
meeting its output target, is likely to uphold its promise
because it's going to host the second-ever meeting of the heads
of state of OPEC member nations, so it would be embarrassing for
Chavez to boost production before the end of March, Barakat said.
Small U.S. producers won't turn up output because they'll be
afraid that at any moment, OPEC could turn the taps back on,
Barakat said.
``By the time production is ready and pumping, the party may
be over,' Barakat said. ``The smaller producers will have come
in at the tail end of the party.' |
