Coil beginnig to re-coil...Now oil..next IMO dollar is going to get hit on inflation worries, massive explosion of USA trade deficit and cheap asian sale which has ally started
in earnest...
FOCUS-OPEC plans bold oil cut to raise prices
04:52 p.m Jun 23, 1998 Eastern
By William Hardy
VIENNA, June 23 (Reuters) - Oil cartel OPEC signalled doubting markets
on Tuesday it was ready to drain swollen supply by more than expected to
pull prices higher.
Gulf sources said the cartel's dominant force, Saudi Arabia, would
contemplate output cuts beyond those it had already pledged provided
others made promised sacrifices.
''I think there should be an adequate cut to reverse the trend in the
markets,'' said OPEC President and United Arab Emirates Petroleum and
Mineral Resources Minister Obaid bin Saif al-Nasseri.
Any significant extra cuts would take Saudi Arabia close to the eight
million barrels per day (bpd) level it held for six years after the
1990-91 Gulf crisis.
That would send a strong signal of the kingdom's intent to reverse a
decline in prices set in motion when it led a 10 percent rise in the
group's output limits late last year.
Oil prices rose when OPEC delegates said Saudi Arabia had taken the
initiative in securing the extra reductions.
''800,000 barrels per day is short -- if you look at the market
fundamentals you should probably be aiming at 1-1.3 million barrels per
day,'' a non-Saudi delegate said.
Another proponent of extra reductions, Kuwaiti Oil Minister Sheikh Saud
Nasser al-Sabah, said he expected fresh OPEC production cuts to match
the 1.245 million bpd the cartel earlier pledged to siphon from the
market from April 1.
Delegates said the tricky question of compliance with output cuts could
yet frustrate attempts by Wednesday's gathering of the 11-country group
to lift depressed prices.
They said OPEC's number two producer Iran was a focus of concern because
it recently reported hefty output in a move widely seen as a bid to
minimise future supply sacrifices.
Iran's Foreign Minister Kamal Kharrazi was in Saudi Arabia for talks
with Crown Prince Abdullah and Foreign Minister Prince Saud al-Faisal on
the oil price slide.
Prince Abdullah underlined the need for the two countries to broaden
cooperation on controlling the oil market ''crisis,'' the official
Iranian News Agency said.
Iran has circulated among some fellow OPEC members a proposal that the
group extend its output cuts to a full 10 percent from a benchmark of
production earlier in the year, a Venezuelan delegate said.
The delegate was not able to say whether the idea had drawn any support.
A Kuwaiti delegate said his colleagues had received no such proposal
from Iran.
Saudi Arabia is likely to strongly resist Iran's idea because it would
take Riyadh 130,000 bpd below its cherished eight million supply.
Oil prices traded sharply higher as dealers revised their expectations
of OPEC's ability to slice oversupply. Brent crude ended 68 cents
stronger at $13.94 a barrel in London.
''I would like to see $18-20 a barrel,'' said Qatari Oil Minister
Abdullah al-Attiyah. ''Any decision that OPEC has reached we will
support it.''
The price slide has chopped OPEC oil revenues by a third and pressured
national budgets already pared to the bone.
Another challenge to the latest planned sacrifices comes from
perceptions on oil market trading floors.
Traders say the more OPEC says it should cut, the more the market will
be dismayed if it does not match its words.
''The OPEC spin is positive, but I'll believe it when I see it,'' said
Tom Benz of Cresvale International in the United States.
''A million is on the cards and 1.3 milliion would be mildly
impressive,'' said Nigel Saperia of Bankers Trust.
And Venezuela's Erwin Arrieta warned the market would not recover no
matter what was said at the gathering if producers continued to pump in
excess of demand.
Prices fell to a 10-year low in March after an OPEC decision last year
to hike output limits just as Asian demand began to falter.
Asia's financial crisis means producers can no longer rely on any
incremental demand from the region which in recent years has accounted
for about half the globe's extra oil consumption.
Ministers are due to assemble in a formal plenary session for the first
time on Wednesday. In a preparatory step, OPEC's market monitoring
committee met for almost two hours to study the extent of oversupply,
breaking up without comment.
((OPEC Newsroom +431 710 6253))
Copyright 1998 Reuters Limited. |
