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Strategies & Market Trends : Commodities - The Coming Bull Market -- Ignore unavailable to you. Want to Upgrade?

To: craig crawford who wrote (743)	8/26/2001 8:57:49 PM
From: craig crawford	Read Replies (1) \| Respond to of 1643

Unified OPEC Walking Fine Line on Oil Prices Energy: Prices at the pump could rise as the cartel tightens its grip on supplies, but that could backfire. latimes.com Gasoline is back under $1.50 a gallon just as the summer driving season nears its end, but don't bet on pump prices staying that low. Not with OPEC back in the driver's seat. ........................................................................................................................... That's why OPEC--which pumps about 40% of the world's oil--already has slashed its production three times this year, to keep a floor under prices and to ensure that an oil glut doesn't develop as it did about three years ago, when crude prices plummeted to $10 a barrel. ............................................................................................................................... Indeed, OPEC's priority is not the U.S. economy or American drivers but maintaining its own fortunes. Its members' "short-term concerns are the revenues of their states, and defending the prosperity they're trying to generate," said Amy Myers Jaffe, senior energy analyst at Rice University's Baker Institute in Houston. OPEC has done so by focusing on its "reference basket," which is the blended price of seven benchmark crude oils, six of which are produced by OPEC members. The group's mandate is to keep the basket's price range, or band, between $22 and $28 per 42-gallon barrel. The seven crudes are heavier, lower-quality oils than the light, sweet crudes--such as the U.S. benchmark, West Texas intermediate--that are easier to refine and thus command higher prices. So OPEC's basket price is typically as much as $5 a barrel less than those premium oils; it is currently about $24.30 a barrel. ............................................................................................................................... It was that glut three years ago--aided by what many consider a tactical blunder by the cartel--that was the genesis for the emboldened, powerful OPEC of today. OPEC in late 1997 boosted its production even though Asia's economy was collapsing. Within a year, the world was awash in oil and crude prices had plunged to $10 a barrel. That was a boon to motorists and industries worldwide, but it ravaged the economies of OPEC's members.