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

To: mph who wrote (24565)	6/23/1998 11:32:00 AM
From: pz	Read Replies (1) \| Respond to of 95453

Tuesday June 23, 10:46 am Eastern Time FOCUS-Oil prices up but OPEC stays under scrutiny LONDON, June 23 (Reuters) - World oil prices climbed on Tuesday as OPEC ministers gathered in Vienna to try to trim oil supply to glutted markets. But dealers said the recent gains could be quickly reversed if the oil producing cartel fails to cut output deep enough to satisfy sceptical traders. World benchmark, Brent blend crude, was up 41 cents at $13.65 a barrel at 1300 GMT, having hit a low of $12.15 last week. With the OPEC ministers due to meet on Wednesday ''we're in a little lull today and probably will be tomorrow as well,'' said Nigel Saperia, head of the oil trading desk at Bankers Trust International in London. OPEC is trying to reduce the flow of oil to soggy markets for the second time in three months. A cut of 1.245 million barrels per day (bpd) agreed in March only briefly lifted oil prices which have since fallen back. Last year prices averaged over $19 a barrel and until then, had been on an upward trend for three years. Prices fell to a 10-year low in March after an OPEC decision last year to hike output just as Asian demand began to falter. But even with oil prices at 25-year lows in real-terms, OPEC is struggling to convince a doubting market that it has buried its cheating past. Venezuelan oil minister Erwin Arrieta said on Tuesday OPEC must re-establish credibility with the market. ''We are in the hands of futures buyers and sellers'' he said in Brussels. High on OPEC's agenda in Vienna will be 800,000 bpd of cuts on top of 1.245 million bpd OPEC promised to chop off in March. Many analysts believe that will not be enough to stem the tide of unwanted oil despite help from oil producers outside the cartel. ''We think they (OPEC) need to cut a further 0.5 to 1 million barrels per day'' over and above the 800,000 bpd already pledged, said John Toalster, oil analyst at Societe Generale Securities in London. "And they need a pretty high level of compliance," he added. OPEC insiders estimate the March cuts drew only 75 percent compliance, a typical performance from the 38-year-old commodity club with a patchy record of output discipline. Non-members Mexico and Oman have backed the new proposed cuts by offering 120,000 bpd in their own reductions. But some believe that may not be enough to turn the tide in OPEC's favour given slowing global oil demand growth. ''The market has excess of 2.5 million barrels a day. It has to be drained out to achieve a reasonable and fair prices,'' said the Qatari oil minister Abdullah bin Hamad al-Attiyah. ''It's just a matter of when to go short,'' said Saperia, echoing the views of many in the market. OPEC's problem is that while world demand is still rising, the rate of demand growth has slowed sharply this year. Asia's financial crisis means producers can no longer rely on any incremental demand from the region which in recent years has accounted for about 50 percent of the globe's extra oil consumption. Traders have been scouring the world for places to store unwanted oil, some of which has been rejected by cash-strapped Asian buyers. Some have hired oil tankers for stop-gap storage as the head of the West's oil ''watchdog'' confirmed this week that ''there are now difficulties in finding storage for new stocks.'' Meanwhile, rising Iraqi exports will work against efforts by OPEC to soak up excess supply. The U.N. Security Council voted last week to approve $300 million in equipment to upgrade Iraq's dilapidated oil industry. This will eventually lead to higher oil exports but the supplies are not expected to reach Baghdad for several months. More than 200 million barrels of Iraqi crude has been approved by the U.N. for sale under the fourth phase of its ''oil-for-food'' deal with Baghdad, oil industry sources said on Monday. Prices in dollars per barrel: Jun 23 Jun 22 (1305 GMT) close IPE August Brent 13.66 13.24 NYMEX August light crude 13.96 13.65