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

To: The Ox who wrote (25457)	7/10/1998 9:51:00 AM
From: Captain James T. Kirk	Read Replies (2) \| Respond to of 95453

Friday July 10, 4:43 am Eastern Time POLL-Analysts see long haul for oil price recovery By Andrew Mitchell LONDON, July 10 (Reuters) - Oil exporters' output cuts should prove enough to haul crude prices a little higher by the end of the year but oil will stay far cheaper than in recent years, a Reuters poll of industry experts found on Friday. Producers meanwhile may face a market relapse at any time if Asia's economic crisis deepens or they lose resolve in carrying through pledged output cuts, the experts warned. A survey of investment banks, energy consultants and oil firms forecast an average fourth quarter Brent crude price of $15.94 a barrel up from $14.51 in the third quarter. That would represent just a mild recovery from Brent's current rut near $13. Brent has averaged just $14.28 so far in 1998 -- five dollars below last year and six below the average $20.30 a barrel of 1996. Brent was expected to remain under the cosh next year at just $16.12, the average of analysts forecasts showed. ''We upped our third quarter forecast 50 cents just on the psychological effect of last month's new production cuts,'' said Mike Barry of London's Energy Market Consultants. ''But the fundamentals if anything are more bearish. Asia-Pacific demand is looking worse every day.'' ''The only thing that's certain is that prices will be volatile,'' said Richard Savage of SG Securities in London. SG believes Brent will crawl back above $16 by the end of the year to complete a $15 full year average. Consultants were less optimistic on the prospects for a recovery in oil prices than financiers. An average of three consultants and one oil company forecast just $15.45 for fourth quarter Brent slipping back to $14.95 for 1999. Seven banks projected a fourth quarter price of $16.20 a barrel, rising to $16.79 next year. Iraq remains a wild card for oil prices and attention now is focusing on October's United Nations report on Iraqi weapons compliance. Iraq will be pushing hard for an all-clear on sanctions, allowing full resumption of oil exports through an energy infrastructure enhanced by a recent $300 million injection for repairs. But if Baghdad is thwarted in October, analysts say it might call off the U.N. oil-for-food exchange altogether, easing producers' problems at a stroke. ''The big question for the oil market is what's coming back faster, Asia or Iraq,'' says Roger Diwan of Washington's Petroleum Finance Company. ''In the fourth quarter Brent could be anywhere between $10 and $20 depending on what Iraq does.'' Most analysts agree that over three million barrels per day (bpd) of producer cuts thrashed out in three stages this year will eventually ease the gargantuan stock surplus suffocating any price revival. But they caution that OPEC producers must keep up the 75 percent compliance level with cuts managed so far, and be prepared to reduce more later this year if prices are still languishing. ''It all depends on whether they do what they say they're going to do,'' said Ken Haley, chief economist at Chevron (CHV - news). ''The fourth quarter is likely to be higher than the third quarter but after that it's a crapshoot.'' And many add that as prices creep higher, producers could renege on cutback commitments to renourish revenue-starved economies. ''There are a lot of promises not being fulfilled as quickly as they need to be,'' said Alan Struth, chief economist of U.S. independent Phillips Petroleum (P - news). ''As we get to the fourth quarter I imagine there will be a lot of foot-dragging.'' ''Everybody's in the nail-biting stage,'' said Peter Bogin of Cambridge Energy Research Associates, who sees Brent heading for a range between $15 and $16. More cause for producer optimism was seen by Jurjen Lunshof of Credit Lyonnais. He visualised Brent back up to $18 by the fourth quarter. ''They've got no choice but to enforce the cuts. Low oil prices are a sufficient driver to knock some sense into them,'' he said. ''Demand in US is pretty robust and we should start seeing some inventory rebuilding in Asia. 'La Nina' means we should get a more normal winter too.'' La Nina is the cold weather pattern that weather watchers believe is now following the El Nina global heatwave partly responsible for last winter's demand slump. Economic realities also mean that sustained low oil prices must eventually force enough supply off the market to force values back up to a more familiar range. ''The non-OPEC producers, with high-cost output are the ones who will really start to suffer if prices stay at this sort of level for long,'' said Kleinwort Benson's Mehdi Varzi, predicting $16 Brent from the fourth quarter. Details of the poll of Brent price forecasts for third quarter and fourth quarter 1998 and full year 1999 in dollars a barrel are as follows: 3Q '98 4Q '98 1999 Cambridge Energy Research, Paris 14.00 15-16 15-16 Credit Lyonnais, London 15.50 18.00 19.00 Credit Suisse First Boston, New York 15.00 16.50 17.50 Deutsche Morgan Grenfell, London 14.00 14.00 15.00 Energy Market Consultants, London 14.00 15.00 14.00 Dresdner Kleinwort Benson, London 14.00 16.00 16.00 Lehman Brothers, New York 13.85 16.50 16.50 Merrill Lynch, London 15.25 16.25 17.50 Petroleum Finance, Washington 14.55 15.30 15.30 Phillips Petroleum, Tulsa 14.00 16.00 15.00 SG Securities, London 15.50 16.27 16.00 Average 14.51 15.94 16.12 --------------------------------------------------------------------------------