00:04 DJS OPEC Moved Closer In August To Target Of Reducing Its Oil Supply
00:04 DJS OPEC Moved Closer In August To Target Of Reducing Its Oil Supply
By Bhushan Bahree, Staff Reporter of The Wall Street Journal
GENEVA -- The International Energy Agency says OPEC last month moved
close to its target of reducing oil supply by about 3.5% of the world total to
prop up petroleum prices.
IEA data for August showed the members of Organization of Petroleum
Exporting Countries, excluding Iraq, cut supplies by 2.16 million barrels a
day, or 83% of their target of 2.6 million barrels a day set under agreements
earlier this year.
But industry experts expect recent gains in the price of oil to be
short-lived and markets to remain volatile.
That is because growth in demand for oil is being whittled down as the
Asian financial contagion spreads to other parts of the world and slows
economic activity. Oil producers, including members of OPEC, may have to
reduce output further if they want to see sustained price gains, these
industry experts say.
"OPEC has done a credible job of cutting output," says Lawrence
Goldstein, president of New York-based Petroleum Industry Research Foundation.
"They just haven't done enough."
What's enough is proving to be a moving target, with the IEA noting
such factors as "the financial crisis in Russia and threat of global
deflation" influencing perceptions of the need for oil.
After the latest downward revisions, the Paris-based IEA expects world
demand for oil to rise by about 700,000 barrels a day in 1998 to a total of
74.5 million barrels a day. That compares with demand growth of two million
barrels a day in 1997. Meanwhile, industry stocks still are at high levels
despite some recent reductions in U.S. crude oil inventories.
"The situation is so dire that I believe Saudi Arabia, the United Arab
Emirates and Kuwait will reach the conclusion to cut (their output)
unilaterally between now and November," when OPEC's ministers are scheduled to
meet next, says Antonio M. Szabo, president of the Houston energy consulting
firm Stone Bond Corp.
Meanwhile, OPEC may be getting help from marginal producers of oil in
the U.S., Canada and elsewhere who have been shutting down production because
they can't make money at today's low prices. Mr. Goldstein says such
price-induced cutbacks may total 750,000 barrels a day, or more than one-third
of the much publicized supply reduction target of OPEC.
But Mr. Goldstein and others expect demand growth will be weaker than
IEA estimates. Mr. Goldstein, for instance, figures petroleum demand growth at
no more than 500,000 barrels a day in 1998, or two-thirds of that anticipated
by the IEA.
"The picture is terrible" for the producers, says Leo Drollas, deputy
director of the London-based Centre for Global Energy Studies. Mr. Drollas
reckons oil prices won't change much between now and next June. He expects
North Sea benchmark Brent blend crude to average $12.50 a barrel in the first
half of 1999.
Brent crude oil for October delivery ended at $12.93 a barrel on
London's International Petroleum Exchange Friday, down 34 cents from Thursday,
when prices had risen 51 cents a barrel.
On the New York Mercantile Exchange, sweet, light crude for October
delivery settled at $14.35 a barrel Friday, down 33 cents after rising 55
cents Thursday.
Copyright (c) 1998 Dow Jones & Company, Inc.
All Rights Reserved.
09/14 12:04a CDT
i admit it, i bought several days ago too. i think this weak sister may score a run anyway; oil shorts are rather befuddled right now |
