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To: Second_Titan who wrote (80843)	12/6/2000 7:23:37 AM
From: Second_Titan	Respond to of 95453

Oil Traders Link Sharp Crude Falls To Equity Mkt Gains By JEREMY BOWDEN Of DOW JONES NEWSWIRES SINGAPORE -- Asian oil traders - not famed for their faith in free markets - are linking recent dramatic falls in crude oil futures to Tuesday's sharp jump in equity markets, particularly the U.S. Nasdaq. Oil traders say little has changed over the last week in terms of oil market fundamentals, and that the almost $5-a-barrel fall in Nymex January light, sweet crude futures since last Thursday is a result of hedge funds switching speculative investments from oil futures to equity shares. "It looks like hedge funds are shifting their money... a bit of year-end window dressing. Nothing has changed in terms of oil market fundamentals," said one oil trader. "It seems to me that the speculators see oil with less potential upside than high-tech stocks right now, so they're switching (investments)," said another. The high-technology-heavy U.S. Nasdaq equity market rose over 10% Tuesday, its largest single daily gain ever, seemingly on the basis of a few words from U.S. Federal Reserve Chairman Alan Greenspan. Many oil traders and sources at the Organization of Petroleum Countries say oil has been overvalued for several months, with ample crude available, particularly in Asian markets. The market had been at a loss to explain - in terms of fundamentals - why levels hadn't dropped sooner. Evidence and opinion now point to speculative investors holding oil futures on the possibility of price spikes from a disruption to winter crude supply. Fuel For Market Skeptics The dramatic fall in crude, apparently unrelated to any change in fundamentals over the last week, is expected to fuel OPEC criticism of Western oil markets, and could prove to be a trigger for some members to reintroduce posted prices for crude exports. Posted prices were phased out in the late eighties when a global oversupply of crude - and the competition for buyers that came with it - forced OPEC producers, notably Saudi Arabia, to link their export prices to benchmark crudes such as North Sea Brent. After raising output by 3.7 million barrels a day this year, OPEC members said that recent high crude futures prices had little to do with shortages in supply, blaming speculators and tight Western product markets instead. Their skepticism seems to have gained credibility from these latest falls, with the greatest irony that the falls began with news that Iraq would halt crude exports, taking over 3% of international crude supply off the market. "This would have been bullish in terms of fundamentals in anybody's book, and yet prices tumbled. Why?... I'll tell you one thing, it's got nothing to do with any change in oil supply and demand," said one trader. OPEC and major oil consuming nations reiterated their desire for 'stable and transparent' crude prices after last month's meeting between oil importers and exporters in the Saudi capital Riyadh. OPEC's attempts to achieve that goal through managing supply this year haven't worked. As OPEC claims, it appears there are other factors at work in the market, which cannot be managed. And if oil price stability is the primary goal, a move away from market-related pricing for OPEC crude exports could be the best solution, at least in the short term.