A little more fuel to the fire?
Wednesday December 1 9:53 AM ET
Oil Staggers As OPEC Studies Options
By William Maclean
LONDON (Reuters) - Jittery oil markets dumped early gains Wednesday amid signals OPEC
powers might raise output, possibly before March, if supply shortages keep prices sizzling.
Benchmark Brent for January was 13 cents adrift at $23.51 a barrel at 9:43 a.m. EST after sliding
from an opening of $24.25.
Sentiment crumbled after a senior OPEC delegate said Saudi Arabia and other big exporters
were likely to raise production if the price of U.S. benchmark crude WTI stayed at or above $25
a barrel on fundamentals.
``That story put a lid on this market,' said Nauman Barakat, a trader at ABN-AMRO Energex in
New York.
``The market is very agitated by this,' a senior dealer in London said.
The OPEC delegate said producers would not rush to ease supply restraints unless WTI (West
Texas Intermediate) was at $25 or more on a sustained basis, reflecting supply-demand
fundamentals and not the result of speculation.
``The general trend among Saudi Arabia and other producers is that if prices stay high at $25 or
above for (WTI) and there is a growth in demand and inventories are down, then the tendency
would be an increase in production,' he said.
``If the oil price spikes and is the result of a shortage of oil in the market and a time of rising
demand, then producers would be likely to increase before March' when a global output cut pact
expires.
Wednesday WTI crude was trading at around $24.64 after spending the past two weeks above
$25.
Three rounds of production cuts totaling nearly five million barrels per day (bpd) by OPEC and
some non-OPEC exporters have rescued prices from below $10 late last year.
But rapidly falling inventories ahead of the peak demand in the northern hemisphere winter has
raised questions over whether producers will be forced to raise output.
OPEC and other producers are under pressure to secure long- term price stability and establish
sound market management.
Prices had firmed earlier after the American Petroleum Institute (API) industry group reported that
U.S. crude inventories had declined for the third consecutive week.
Aziz Reiterates Rejects Stopgap Oil Phase
Further support came from Iraqi Deputy Prime Minister Tareq Aziz who reiterated Iraq would not
accept a U.S. proposal for a one-week extension of Iraq's U.N. oil-for-food deal.
The proposal is aimed at providing the U.N. Security Council with more time to consider ways to
get U.N. arms inspectors back into Baghdad after a year's absence.
Speaking in Moscow, Aziz said only a six month extension of oil-for-food was reasonable for
Iraq, allowed to export crude subject to U.N. monitoring under the three-year-old arrangement.
Iraq's position raises the prospect of a third consecutive week without Iraqi exports and more
tightening of global supply.
Iraq earlier this month sent prices to nine-year highs when it rejected an earlier proposed
two-week extension and halted its 2.4 million barrels per day (bpd) exports.
The Security Council has until Saturday, when the two-week extension runs out, to renew the
oil-for-food deal.
In addition, Iraqi Oil Minister Amer Muhammed Rashid, speaking in Jordan, reiterated Baghdad's
rejection of a Western-backed comprehensive draft resolution as the basis of discussions on
overall Iraq policy at the Security Council |
