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To: Think4Yourself who wrote (61888)	3/9/2000 9:47:00 PM
From: Tomas	Respond to of 95453

OPEC, Oil Prices, Production: Comment By Josh P. Hamilton New York, March 9 (Bloomberg) -- Comment from Alan Struth, an economist at Honeywell, Bonner & Moore in Houston, a division of Honeywell Inc., on the March 27 OPEC meeting and the expiration of the group's agreement on production limits. ``I think they'll be cautious not to overdo it like in November 1997,' when a rise in output precipitated a yearlong price decline to 12-year lows, Struth said. ``They'll raise quotas by 1 million barrels to 1.5 million barrels a day, which would leave us fairly constrained. Keeping us over $30 would be OPEC only increasing production by 1 million barrels or less. ``We've got crude averaging $30.50 in March, falling to $27.50 in April, and $26 in May. ``Most of the OPEC countries don't have spare capacity so they don't want more volume thrown on the market. But what really matters is what Saudi Arabia does,' and Saudi Arabia wants to raise production. Once production limits are increased, ``they'll probably move back in line with their quota, as opposed to overproducing by about 300,000 barrels a day now. So an increase in quota of 1 million won't necessarily mean that big an actual increase in supply,' meaning prices aren't likely to plunge. ``The next step to watch is what refinery runs and imports look like. What we've got right now is an unsustainable situation. We need crude imports of 9 million a day in May and June. And right now they're about 8.2 million.' ``Given the (high profit) margins we're seeing, everyone will run flat out,' once more supply becomes available. ``I don't see gasoline prices going up much more than we've got now. By Memorial Day the prices will have settled down.' On the lack of increases in non-OPEC production: ``The majors have been consumed with these mergers that have taken a lot of their human capital to work out, and they came into the year very cautious. ``But they made a lot of cash at these prices, which will be reflected in higher capital spending in 2001, 2002. Companies review their budgets mid-year and I think you'll see them adjusting higher. ``You'll see it first with small producers in the U.S. There's a good million to 1.5 million barrels a day that is very vulnerable to changes in price. With them we saw production declines of about 500,000 a day in 1999. ``By late 1999, production stabilized. As we begin 2000, we're seeing production increases of 50,000 to 150,000 a day. We're the high-cost producer, so production is very susceptible to price. ``Production by the majors is large-scale, long term, and doesn't turn on a dime like the little guys.'