OPEC Mulls Output Rise of Up to 1.5 Mln Barrels a Day
(Talk like this may get us a buying opportunity Monday. But I'm not expecting too sharp a dip. The oil sector companies would've been much weaker going into the OPEC meeting if the situation was such that the Saudi's could drive the price down by saying they would sell another million barrels of sour over the 1/2 million. This 'Jawboneing' may have some effect, but not much and not for long.
Just mvvho, of course --d)
Bloomberg Energy
Sun, 10 Sep 2000, 8:20am EDT
09/10 07:34 OPEC Mulls Output Rise of Up to 1.5 Mln Barrels a Day (Update4)
By Sean Evers, Alison Flint, Alex Lawler, Joshua Schneyer and Stephen Voss
Vienna, Sept. 10 (Bloomberg) -- Saudi Arabia and its OPEC colleagues will consider boosting oil output by as much as 1.5 million barrels a day, or 5.2 percent, to lower oil prices that are among the highest in a decade, a senior OPEC official said.
The Organization of Petroleum Exporting Countries will discuss an increase of between 1 million and 1.5 million barrels a day in hopes of lowering oil to $25 a barrel from above $33 now, said a senior OPEC official familiar with Saudi Arabian oil policy. Kuwait's oil minister, Sheikh Saud Nasser al-Sabah, said the boost would be between 700,000 and 750,000 barrels a day.
With oil hovering at a level not seen since the 1990 Persian Gulf War, U.S. President Bill Clinton and European and Asian finance ministers have called on OPEC to open the taps and stem oil's 31 percent rally this year. Traders and analysts generally expect an increase of 500,000 to 800,000 barrels daily.
``Prices will definitely fall five or six dollars'' a barrel with an increase of as much as 1.5 million, said Mehdi Varzi, an analyst at Dresdner Kleinwort Benson. ``There's far too much hype in this market'' fed by speculation.
The ministers assembled this morning and in the suite of OPEC President and Venezuelan Energy Minister Ali Rodriguez to discuss their strategy. The time of today's formal meeting hasn't been set but is expected to be this afternoon. OPEC ministers have a scheduled dinner at 7 p.m. local time to celebrate the group's 40th anniversary.
Outlook
The head of Libya's OPEC delegation, Abdalla Salem El-Badri, said the increase would be between 500,000 and 1 million barrels. Qatar's oil minister, Abdullah bin Hamad al-Attiyah, said he was not aware of plans for an increase of between 1 million and 1.5 million barrels a day.
Algerian Oil Minister Chekib Khalil said he was ``confident'' the increase would be 500,000 barrels and he hadn't heard of any request to boost by more than a million barrels daily.
Industrialized nations have called any price of more than $30 a barrel unacceptable. Crude oil futures closed at $33.63 a barrel in New York on Friday, and the market reopens at 7 p.m. local time tonight.
Ministers from the Asia-Pacific Economic Cooperation forum ended a two-day meeting in Brunei calling for OPEC to increase production to avoid the chance that rising energy prices would restrain economic growth.
OPEC, in turn, wants lower prices to discourage development of non-OPEC oil fields and growth in alternative energy sources.
Higher fuel prices are filtering through the economy. Union Pacific Corp. last week announced an average 3 percent rate increase to haul freight on the largest U.S. railroad, while Continental Airlines Inc. and other carriers instituted a $20 fuel surcharge on round trips.
Concern
OPEC has resisted pressure to boost output again because most members, led by Kuwait, Iran and Venezuela, believe the oil market is already adequately supplied. Many nations also lack the ability to produce more oil and stand to lose revenue as output increases elsewhere and prices decline.
The group fears that too much oil would deflate prices to 1998 levels, when the price dropped below $10 a barrel. The senior OPEC official said the group could always reduce production if the price fell below $22 a barrel.
The U.S. has threatened to release crude oil from its Strategic Petroleum Reserve -- kept as a buffer to protect in times of war or other emergencies -- if OPEC didn't boost production enough.
The senior OPEC official familiar with Saudi policy, speaking to reporters while on a morning jog, said that if the U.S released reserves then members would reduce output by the same amount.
The OPEC official said any increase in production quotas would be distributed on a pro-rata basis, depending on the size of each country's current quota. Saudi Arabia, which holds most of the group's spare capacity, would make up the shortfall in instances where OPEC members were unable to pump more, the official said.
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