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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Bazmataz who wrote (21453)	5/5/1998 1:29:00 PM
From: pz	Respond to of 95453

By Richard Mably LONDON, May 5 (Reuters) - Oil producers are contemplating a second round of output cuts for as short a period as three months if crude prices sag again, industry sources said on Tuesday. The sources said discussions had gone some to way to planning a reduction of 500-600,000 barrels a day (bpd) before OPEC's June 24 meeting in Vienna. But they said producers faced a difficult balancing act in deciding whether or not to trim more supplies from a bulging market. Informal contacts between the ministers and top officials of OPEC's Saudi Arabia and Venezuela and non-OPEC Mexico have decided it is too early to decide yet on extra cuts. "Prices are recovering and we are not contemplating additional cutbacks at this moment," Mexico's Energy Minister Luis Tellez said on Monday. The ministers want to see production returns for April to see the results of the March 22 Riyadh pact they orchestrated. The pact resulted in pledges to withdraw some 1.5 million bpd, including 1.25 million from the Organisation of the Petroleum Exporting Countries, until the end of the year. If prices warrant it, any decision on extra short-term cuts is not likely until after a meeting of Arab energy ministers, including Saudi Arabia's Ali al-Naimi, in Syria on May 10, some sources said. Naimi's six-day visit to the United States, ending on Wednesday, had stoked speculation that a further agreement was in the offing. Key to any decision will be oil price levels over the next few weeks. "With prices where they are now they may decide not to do anything more," said one source familiar with discussions so far. "But if they fall again they'll act." Prices much below $14 for North Sea Brent could be the trigger for further action. Brent was valued just short of $15 a barrel on Tuesday, comfortably above its sub-$12 low of early March but still $4.50 short average prices last year. Less hawkish ministers are wary about stoking the market too high for fear of handing a quick bonus to some of the high-cost producers which have been forced to cut output by this year's price slide. Lower supplies from major producers like China, Russia, the United States and Canada can all be attributed to poor oilfield economics at low prices. In addition, producers are concerned not to further harm demand in the fragile Asian market where a collapse in currencies has wiped out the advantage of cheap crude. Several OPEC ministers are already on the record in support of further reductions if necessary. If oil prices do fall again further agreement on more cuts is likely to be wrapped up ahead of OPEC's June 24 conference in Vienna leaving the meeting to rubber stamp the decision.