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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: BigBull who wrote (46389)	6/14/1999 8:55:00 AM
From: Wowzer	Respond to of 95453

June 14, 1999 Big OPEC Members Are Complying With Promise to Cut Oil Production By STEVE LIESMAN Staff Reporter of THE WALL STREET JOURNAL The biggest members of OPEC are delivering on promises to cut back oil production as world oil demand is showing signs of reviving, the International Energy Agency said in its monthly report. The Paris-based IEA said the Organization of Petroleum Exporting Countries took an additional 320,000 barrels a day off world markets in May, and that it has now delivered 90% of the cuts it promised over the past year, up from a revised 82% in April. The oil cartel, which has pledged in three separate agreements to cut world output a total of 4.3 million barrels a day, "is showing surprising compliance with its agreements," said David Knapp, editor of the IEA's closely watched Monthly Oil Market Report. In addition to the OPEC cuts, world production declined by an additional 80,000 barrels a day as non-OPEC producers reduced their output, too. For the first time since the cuts began in mid-1998, the data are beginning to show that supply, demand and inventories are heading toward normalcy -- although analysts caution that last year's glut isn't gone. The IEA, formed by developed nations during the 1970s to monitor crude markets, expects demand to grow by one million barrels a day in 1999 compared with last year's anemic growth. For most of the past 18 months, the IEA has been ratcheting down its demand forecasts. But the new report shows first-quarter demand grew 2.8% in Asia, which in recent years drove world oil demand. Japan, which is showing surprisingly strong economic growth, saw its demand for crude rise by 0.3% in the first quarter over last year; in the first quarter 1998, Japan's demand fell by almost 3%. Oil prices, which dipped almost $2 a barrel in recent weeks, have rebounded. On Friday, West Texas Intermediate crude closed at $18.43 a barrel in trading on the New York Mercantile Exchange, up 10 cents. The market drew some strength from a threatened strike by Venezuelan oil workers, where the state-owned oil company recently announced a wage freeze. How much more oil prices can climb is a matter of debate. World crude inventories remain at high levels, and they grew again in April, the latest month for which data are available. But inventory growth in the spring is normal and the April increase was far below average, reflecting the OPEC cuts. The amount of oil in storage remains high and isn't expected to decline substantially until the third and fourth quarters. Some analysts argue that a higher price won't be warranted until inventories fall. The IEA data suggest that some OPEC members are more diligent at cutting production than others. Saudi Arabia, Venezuela, Kuwait and the United Arab Emirates have all delivered 90% or more of their pledged cutbacks, according to Leo Drollas, chief economist at the Centre for Global Energy Studies in London. Iran, however, has fulfilled only 80% of its promises, while Qatar and Indonesia have kept pumping almost as if the agreements didn't exist. In addition, some non-OPEC countries such as Russia have boosted exports, though the increase could be the result of exporters trying to beat an expected rise in pipeline tariffs. "You don't know if the higher export can or will be sustained," says Michael Rothman, oil analyst at Merrill Lynch. Mr. Drollas says the large OPEC producers will put up with noncompliance within the cartel as long as prices remain firm. But if prices weaken, he suggests, some producers could decide to abandon the agreement to capture market share.