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To: Les H who wrote (37498)	1/15/2000 10:28:00 AM
From: Les H	Respond to of 99985

Canadian think-tank predicts $30 oil next week CALGARY, Jan 14 (Reuters) - Crude oil prices, which zoomed to a nine-year high on Friday, could hit $30 a barrel next week based on OPEC adherence to output quotas and expectations of dwindling world petroleum stocks, a Canadian energy think-tank said. The Calgary-based Canadian Energy Research Institute said in a crude oil market alert that unexpectedly high oil prices could lead Organization of Petroleum Exporting Countries members to call a meeting in the near future to weigh this week's recommendations to extend output cuts past April. ``While it is possible that OPEC's existing quotas may be rolled over at its March meeting, CERI believes there may be more going on here than meets the eye,' the government-and-industry-funded institute said. ``We continue to expect that if prices continue to strengthen, OPEC soon will call an extraordinary meeting to increase production quotas.' On Friday, benchmark West Texas Intermediate oil for February delivery finished the session $1.33 higher at $28.02 a barrel, the highest level since the 1991 Gulf War and up more than 130 percent from one year ago. The surge capped a week in which oil futures climbed more than $2.50 a barrel as OPEC producers hinted they may be willing to extend the output cuts that rescued world oil markets last year. The hints turned into a bona fide recommendation on Friday, when a committee of OPEC ministers meeting in Vienna called for the oil cartel to keep the cuts in place past April. Canadian oil surged in tandem during the week, with Imperial Oil Ltd.'s (Toronto:IMO.TO - news) posted Edmonton benchmark light oil price jumping C$25 per cubic meter, or C$3.97 a barrel, since Monday. However, CERI pointed out U.S. Energy Secretary Bill Richardson had already served notice in December he believed $27 WTI oil was too dear. The strong oil prices have already had an impact on the U.S. economy, with long-term bond yields rising in recent months, it said. It also said it appeared Saudi Arabia continued to view world oil inventories as too bloated. That could be a reason for its support of continued cuts and apparent departure from its long-held view that moderate oil prices were best for both producers and consumers. ``With the sudden appearance of a consensus among OPEC members to maintain current production cuts later into the year, refiners now will be scrambling for crude oil. Speculators already are bidding up prices,' CERI said. It said it expected the International Energy Agency's estimates for petroleum inventories, due to be released on January 20, would show a ``very large stock draw' last November. ($1=$1.45 Canadian)

To: Les H who wrote (37498)	1/15/2000 10:31:00 AM
From: Les H	Read Replies (2) \| Respond to of 99985

Wall Street deaf to Greenspan's wealth effect worries By Marjorie Olster NEW YORK, Jan 14 (Reuters) - Wall Street seems to be turning a deaf ear to Federal Reserve chairman Alan Greenspan's warning that spending fueled by burgeoning stock wealth may be pushing the economy beyond its growth limits. The stock market went on yet another record-shattering rally on Friday, ignoring the concerns articulated by the Fed chief on Thursday night. Speaking to the Economic Club of New York, Greenspan blamed a ``huge' rise in equity prices which is padding household wealth, at least on paper, for driving aggregate demand beyond the economy's capacity to meet that demand. The excess demand, Greenspan said, put mounting pressure on the already stretched labor market and, if left unchecked, would certainly drive up inflation at some point in the future. ``He really fingered wealth effect as the villain, at least one of the important villains, in what is driving total spending faster than the capacity of the economy to meet that spending,' said James Annable, director of economics at Bank One Corp. in Chicago and a former Fed economist. In what Wall Street saw as a clear signal the Fed intends to raise official interest rates again at its meeting in early February, Greenspan said the imbalance between supply and demand could not continue indefinitely and would be corrected through higher interest rates. The recent rise in market interest rates was ``supported by a central bank intent on defusing the imbalances that would undermine the expansion', Greenspan said. INFLATION DATA BLUNTS GREENSPAN'S PUNCH, STOCKS RALLY The blue-chip Dow Jones industrial average blasted through another record high Friday and the Nasdaq composite, dominated by technology giants, shot up more than 3.0 percent. Any concerns about Greenspan's speech melted away after softer-than-expected inflation data for December. The Consumer Price Index rose a paltry 0.2 percent overall and excluding volatile food and energy rose an even milder 0.1 percent. What really caught analysts' attention was the year-over-year increase in core CPI, which slowed in December to just 1.9 percent -- the lowest yearly rise since 1965. ``The market had already sort of turned a deaf ear to (Greenspan). When the inflation numbers came out they forgot about him,' said Annable. ``He had just laid out what is going to lead to accelerating inflation. The next day he gets trumped by decelerating inflation.' In the afternoon, the Dow was up 150 points or 1.3 percent at 11,732, off its all-time high of 11,738 set earlier. The Nasdaq rocketed 3.0 percent to 4076. Bonds were off after an earlier pop, pressured by inflation concerns from higher oil prices. DWELLING ON THE WEALTH EFFECT Michelle Gerard, a Treasury market strategist at Prudential Securities, said Greenspan dwelt more heavily on the wealth effect in Thursday's speech than in past ones. She took that as a signal the Fed remained on a path toward tighter credit and would raise the 5.5 percent federal funds overnight bank lending rate again at the policy-making Federal Open Market Committee (FOMC) meeting on Feb. 1-2. If it does, it would be the fourth rate increase in seven months. ``I thought Greenspan drew a closer link between equities and their impact on the economy than I've heard him before. He devoted a good deal of time to the wealth effect, its contribution to the excess demand the Fed is concerned about.' Greenspan estimated about one percentage point of the 4.0 percent annual rise in gross domestic product seen over the last several years was attributable to wealth-effect spending. Fed watchers said Greenspan was not targeting a specific level for the stock market, but that he was concerned about its impact on the broad economy. WITHOUT INFLATION SMOKING GUN, FED MOVES WILL BE GRADUAL Wall Street economists in the audience at Thursday's speech came away with the impression that the Fed will continue on a gradual path of rate hikes, with no drastic moves imminent. ``He preannounced the interest rate increase. It's 25 basis points,' said Annable. ``No matter what you think about the stock market, this Fed cannot be aggressive with benign inflation. They won't do it. They don't have the smoking gun.' Also, there are some signs that higher interest rates are slowing credit-sensitive sectors of the economy, like housing. Greenspan did say that that process was ``already well-advanced'. But he acknowledged the Fed still did not have a clear idea of how much it would take to slow the tremendous momentum of the U.S. economic machine.