Saudi's talkin Brent 20, NOT SATISFIED with current prices.
Energy News
Thu, 13 May 1999, 8:16am EDT
Crude Oil Rises as OPEC Output Cuts Seen Eroding Glut (Update2)
London, May 13 (Bloomberg) -- Crude oil rose 1.5 percent
amid optimism that production cuts from the Organization of
Petroleum Exporting Countries will succeed in ending a glut.
Saudi Arabia, the world's largest producer, said yesterday
it expected Brent crude oil could reach $20 a barrel by the end
of the year, more than $4 higher than today, underlining its
commitment to reduce inventories.
''People are buying because the Saudi comments are a good
pointer to where prices could be heading,'' said Charles Hue-
Williams, head of energy research at Investec Henderson
Crosthwaite.
Brent crude oil for June delivery gained as much as 23 cents
to $15.83 a barrel in afternoon trading on the International
Petroleum Exchange in London, close to a 16-month high. June
crude oil on the New York Mercantile Exchange rose 8 cents to
$17.65 a barrel from yesterday's close in electronic trading.
Ten OPEC members pledged during the past year to cut oil
output by a combined 4.3 million barrels a day from February 1998
levels, yet have failed to achieve their goal. Four other
countries including Mexico and Norway have also reduced output to
help boost prices.
Saudi Arabia Oil Minister Ali al-Naimi, speaking at the Arab
Capital Markets conference in Beirut yesterday, said the price
for a barrel of Brent crude oil would reach $18 to $20 before the
end of the year, the state-owned press agency, SPA, reported.
Unhappy
The Saudi oil minister said he was not satisfied with
current oil prices, and called upon oil producing countries and
oil consuming countries to work together to maintain stability in
the oil market, the report said.
Rising gasoline inventories and poor refining profits have
reduced oil demand and complicated OPEC's job of boosting prices,
traders said.
Gasoline supplies rose for a second straight week, posting
the largest gain in three months, in the week ended May 7, the
American Petroleum Institute said Tuesday.
The increase caused gasoline prices, one of the most
valuable fuels refined from crude oil, to fall 3 percent
yesterday in New York, in turn dragging crude oil prices lower.
Roughly 35 percent of a barrel of oil can be made in to gasoline,
according to Bloomberg analytics.
Gasoline supplies in the U.S., the world's largest energy
consumer, are almost 7 million barrels, or 3.4 percent, larger
than a year earlier and ''look ample for the gasoline season,''
Hue-Williams said.
While gasoline supplies rose, reducing the need for refiners
to buy more oil, crude oil supplies in the U.S. fell for a fourth
straight week, the API said, indicating OPEC's production-cutting
plan is reducing inventories.
''The OPEC talk is seeing off the concerns about the
(gasoline) inventories,'' said Richard Bend, a broker with Cannon
Bridge Corp. ''OPEC is doing very well and so far they seem
believable.''
Oil Supplies
U.S. oil supplies are now more than 12 million barrels less
than they were this time a year ago, according to the API,
signaling an oil glut which sent prices to 12-year lows in
December is being depleted.
According to the Paris-based International Energy Agency
OPEC made 85 percent of its production cuts in April. A Bloomberg
survey showed OPEC achieved a compliance rate of 83 percent.
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