Friday April 3, 4:17 pm Eastern Time
FOCUS-Oil prices up as doubts over OPEC deal
ease
(Adds closing prices)
LONDON, April 3 (Reuters) - World oil prices firmed on Friday as traders warmed to an
output deal aimed at trimming more than two percent of global supply from glutted
markets.
World benchmark Brent blend crude oil closed 26 cents a barrel firmer at $14.43,
extending gains made on Thursday.
''There is no major news to influence prices but it does appear as if sentiment is
changing for the better,'' said Leslie Nicholas at brokers GNI in market comments.
An emergency Organisation of Petroleum Exporting Countries meeting that ended early
on Tuesday approved a 1.245 million barrels per day (bpd) cartel contribution to a two
percent cut in global output.
Other cuts will come from non-OPEC Norway, Mexico, Egypt, Oman and Yemen, which
have pledged to trim 270,000 bpd for a total of 1.5 million bpd in overall promised
reductions.
The aim is to mop up excess oil from flooded world markets and rescue prices from a
40 percent slide that took Brent to a nine-year low of $11.90 a barrel recently.
The cuts achieved their goal in the days after they were first mapped out at a secret
meeting in Riyadh between Saudi Arabia, Venezuela and Mexico, boosting levels by
some $3.
After the Vienna meeting ratified the deal prices fell on the suspicion that OPEC
members would cheat on their commitments, as they have in the past.
But OPEC ministers pleaded for patience, arguing that prices would rise once
production restraint worked its way into crude shipping schedules.
That message appears to have been heeded and Brent has risen, with some dealers
expecting a trading range to be established either side of $15 a barrel.
''Markets rush to judge. The deal will take a bit of time to settle in,'' said Peter Gignoux,
head of the energy desk at Salomon Smith Barney in London.
Customers of major Gulf exporters have already reported output cuts beginning to bite
into export programmes, with incremental volumes that were previously available no
longer on the market.
The deal was given an unexpected boost on Friday by China which cut 150,000 bpd
from its output and by Norway, which passed a decree confirming its 100,000 bpd
contribution to the 1.5 million bpd reduction.
Beijing's largest oil explorer has cut crude output in response to OPEC's cuts, China
National United Oil Corp president Lin Qingshan told Reuters on Friday.
OPEC had not previously factored any Chinese contribution into its output reduction
targets.
Norway's Oil and Energy ministry said its cuts would apply to 36 fields off Norway and
would amount to a three percent cut in 1998 output from 3.2 million bpd to 3.1 million
bpd.
Norway last curbed output in 1986, ordering all companies to pump oil at 10 percent
below full capacity to help prices recover from lows around $10 a a barrel. Those
restrictions were lifted in 1990.
Indonesian Mines and Energy minister Kuntoro Mangkusubroto predicted crude oil
prices would rise to an average of $16 this year as a result of the cuts.
Warm winter weather in the northern hemisphere, growing Iraqi oil exports and a
mistimed OPEC move in November to hike output by 10 percent were responsible for
the slide from last year's average Brent price of $19.32 a barrel.
Rising Iraqi exports will counteract the impact of the cuts after the United Nations gave
Baghdad approval to double existing sales.
But to boost exports Iraq says it needs $300 million for spare parts to repair its oil
installations.
Prices in dollars per barrel:
April 3 April 2
(close) (close)
IPE May Brent 14.43 14.17
NYMEX May light crude 15.88 15.74 |
