Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : News Links and Chart Links -- Ignore unavailable to you. Want to Upgrade?

To: pallmer who wrote (9253)	11/25/2003 2:20:47 PM
From: pallmer	Read Replies (1) \| Respond to of 29601

25 Nov 2003 14:19 ET =DJ Steep Oil Price Drop Seen Taking Pressure Off Of OPEC By Sally Jones Of DOW JONES NEWSWIRES LONDON (Dow Jones)--OPEC sources were unconcerned by the $2 drop in oil prices over the past two days, saying Tuesday the plunge has taken some of the heat out of the market, giving the group time to stand back before deciding its next move. The drop below $30 a barrel in New York from around $32 late last week takes the pressure off the Organization of Petroleum Exporting Countries to put more oil on the market when they meet in Vienna Dec. 4. Instead, the group will be able to focus on its main concern: The potential for a sharp drop in prices after the winter, when growth in supply from independent producers is expected to outstrip growth in demand. "There is no point for OPEC to do anything at the moment," said Leo Drollas, senior consultant at the London-based Centre for Global Energy Studies. Oil prices are still high and in a very comfortable area for the group, he said. But he warned, "It will be a very different picture come January." Prices plunged 6% Monday in New York, but held on Tuesday. January light, sweet crude futures were trading down 4 cents on the New York Mercantile Exchange at $29.70. January Brent blend futures on London's International Petroleum Exchange were down 4 cents at $27.82. Price Band Clock Ticking OPEC's reference oil price, based on the prices of seven grades of crude oil, has been hovering above the group's target price band of $22 to $28 a barrel, putting pressure on the group to raise output. Under an informal mechanism, OPEC has said it will raise output if the price stays above the band for 20 days. Monday's plunge in oil prices pushed the basket down $1.12, but at $28.29 it remained outside the band for a twelfth straight trading day. Day 20 will be Dec. 4. "What is happening now is exactly what OPEC has been saying over the past few weeks," one senior OPEC delegate said. "There is enough oil in the market, it is oversupplied and a correction of the prices is now under way." Tanker tracker Petrologistics is estimating OPEC, excluding Iraq, pumped 25.5 million barrels a day of oil in November, putting the group some 1 million barrels a day over quotas. That report - which aggravated concerns about a possible supply glut in 2004 amid what has been a mild start to winter in the Northern hemisphere - helped trigger the slide in oil futures Monday. The selling was attributed to hedge funds which, in a sharp contrast to their position before September's OPEC meeting, had placed heavy bets that prices would rise. Despite the drop, OPEC sources said they don't expect prices to collapse while Iraqi oil exports look uncertain. As such, the group is expected to keep its 24.5 million barrel a day output ceiling unchanged when it meets next week in Vienna, OPEC sources said. "OPEC now needs to stand back and think about what is happening in the market," one senior OPEC source said. January Meeting Seen Possible The senior source and others close to OPEC policy expect the group to meet again in January, when they may cut quotas to balance the market in the second quarter. "The feeling is that OPEC will keep output unchanged but try to control the overproduction at the December meeting," a senior Iraqi oil source said. "I don't think anybody has the courage to make the decision now, because they're still unsure which way the market and demand is going." Iraq's progress remains the key to the market, Drollas said. Iraq essentially has met its target of producing 2 million barrels a day by December, but getting to the next target of 2.8 million barrels a day by March presents a higher hurdle. Petrologistics estimates Iraq's production will average 1.95 million barrels a day in November, bringing OPEC's total production to 27.45 million barrels a day, an industry source said. Iraqi oil ministry sources put November production at around 2 million barrels a day and exports around 1.5 million barrels a day. Iraq's State Oil Marketing Organization plans December exports to average 1.65 million barrels a day. While production and exports have increased steadily in the south, an inability to secure the key export pipeline to Turkey has held back progress in the north. -By Sally Jones, Dow Jones Newswires; 44-20-7842-9347; sally.jones@dowjones.com (Selina Williams in London, Simeon Kerr in Dubai and Fred Pals in Caracas contributed to this article) (END) Dow Jones Newswires