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Gold/Mining/Energy : Strictly: Drilling and oil-field services

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To: kormac who wrote (60680)	2/21/2000 5:48:00 PM
From: kormac	Read Replies (1) of 95453

From Financial Times. Opec inaction would bring petrol shortages By Matthew Jones - 21 Feb 2000 18:13GMT There will be spot shortages of gasoline in the US in the summer unless the Organisation of Petroleum Exporting Countries loosens its production cutting agreement and global stocks rebuild, the London-based Centre for Global Energy Studies warned on Monday. US gasoline stock cover at the end of January was two days less than in May 1999, just before the peak driving season, while European gasoline stocks in January slumped by 36m barrels year on year. US distillate stock cover at the end of January fell from 41 days at the corresponding time last year to 27 days, the CGES said in its monthly oil report. "Between January and June US gasoline consumption usually grows by one million barrels a day, so there will be mayhem in the summer unless stocks are built up soon," said the CGES. There are increasing signs that Opec will agree to relax the production cuts when members meet in Vienna at the end of next month. One Gulf oil official said over the weekend that an agreement to lift production had already been made, although the details of the size and timing of the increase are yet to be resolved. The CGES believes any rise in production will be engineered to keep Brent crude prices in the $20-25 range since Saudi Arabia, the most influential Opec member, is saddled with a massive debt mountain which stands at about 110 per cent of gross domestic product. At current levels of production Saudi Arabia needs $18 a barrel to cover essential budgetary expenditure. Adding a percentage for public capital formation and a modest level of debt retirement would bring this figure to $21 a barrel. "Saudi Arabia accepts that $30 a barrel is too high, but it cannot afford to see Brent below $20 a barrel at worst," said the CGES. Achieving $20 a barrel by the end of the year would require an increase in production of 1.7 million barrels a day from April onwards. But the CGES forecasts that the increase likely to be agreed will be less than this given Opec's fear of a price collapse. "We will probably get a smaller output increase than needed with the promise of more later," it said.

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