Crude Oil Falls as OPEC Seen Agreeing to Increase Production
London, June 16 (Bloomberg) -- Crude oil fell almost 3 percent after an OPEC official said the group next week will agree to raise output for the second time this year in a bid to reduce prices that are among the highest of the past nine years.
A senior oil official from Indonesia, the only Asian member of the Organization of Petroleum Exporting Countries, said producers were ready pump at least another 500,000 barrels a day. The 11-member group meets Wednesday to consider increasing output.
``They are moving toward an increase,'' said Ian Partridge, an oil analyst at WestLB Panmure. ``Prices have been moving on the latest assessment as to what OPEC will do -- that's why they're (now) down.''
Brent crude oil for August settlement fell as much as 79 cents, or 2.7 percent, to $28.60 a barrel on London's International Petroleum Exchange. Crude oil for July delivery on the New York Mercantile Exchange was down 77 cents at $32.18 a barrel in electronic trading.
Even after today's drop, crude oil prices are more than 70 percent higher than a year ago, largely because of a shortage of gasoline supplies in the U.S. and lower-than-normal oil and gasoline inventories.
Oil prices last week surpassed a level at which OPEC members had agreed to increase production, though the group failed to do so. Rachmat Sudibyo, director general of oil and gas at Indonesia's ministry of mines and energy, said producers would stick to their agreement.
``This is the basic position of all OPEC members,'' he said.
OPEC, whose members pump 40 percent of oil worldwide, had said it would add another 500,000 barrels a day if the 20-day average of its oil price benchmark rose above $28 a barrel. Prices in London gained 8 percent in the week from last Thursday, when prices surpassed that point and it emerged the supply increase wasn't automatic.
Several member-countries, including Saudi Arabia, the world's largest producer, have blamed high oil prices on a U.S. shortage of cleaner-burning gasoline, not a lack of crude from which the motor fuel is made. Such comments indicate members are less willing to raise production.
``There seems to be a subtle shift within key OPEC members over output policy toward a rise in production in excess of 500,000 barrels a day,'' said Lawrence Eagles, commodities analyst at GNI Research, in a daily report.
Ali Rodriguez, OPEC president as well as Venezuela's oil minister, said yesterday the group had reached a decision on output policy for the third quarter, although he declined to say what it was.
Jun/16/2000 6:03 ET
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