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

To: Robert Floyd who wrote (26907)	8/3/1998 10:47:00 AM
From: Pat	Read Replies (2) \| Respond to of 95453

I'm not sure if this has been posted before. Looks very good for anyone long in the business, if it comes true. Will The New Oil Exporting Club Override Opec? NEW YORK - Secrecy, speed, and exclusivity: These appear to be the charter principles for a new club of oil exporting nations as outlined by Saudi Arabian Oil Minister Ali Naimi. The July 6 issue of EIG's Petroleum Intelligence Weekly reports that, in theory, the new organization should augment, not supplant Opec. In practice, it seems destined to undermine the prestige and decision-making importance of the older group in proportion to its own success. But given the low morale and lower effectiveness that have marked the once proud and powerful Opec as it approaches its 40th birthday, concern about its further demise is unlikely to spread much beyond those few Opec member states that are excluded from the new club. The new grouping would be a loose collection of some seven to 10 of the world's largest oil exporters, and its aim is to keep world oil prices in a range of roughly $17-$22 a barrel for benchmark Brent. Its approach would be to intervene swiftly and without warning whenever prices move notably outside that range for any sustained period - much as Mexico, Saudi Arabia, and Venezuela twice sprang production cuts on semi-unsuspecting oil markets earlier this year. The membership list proposed by club architect Saudi Arabia comprises the oil kingdom itself, Iran, Kuwait, Mexico, the United Arab Emirates, Venezuela and, once sanctions are lifted, Iraq. Norway, Qatar, and possibly Nigeria are also likely to be nominated for membership by Saudi Arabia. Deals which have seen pledged production cuts totaling 3.1-million barrels a day this year were hatched at secret meetings of the main three actors, with telephone and in-person lobbying of others, followed by a formal Opec gathering to ratify commitments. Referring back to this sequence of events, Gulf sources emphasize that the idea is not to exclude others, such as missing Opec members Algeria, Indonesia, and Libya. "It will be a complementary grouping (to Opec)," the Gulf source explains. But Libya, apparently left out of the new club because of its politics, was clearly disturbed. "I can assure you that Opec is there, and no one can change it," Libyan Oil Minister Abdalla Salem Al-Badri told PIW after last month's Opec meeting. Architects of the new club say that it would operate in a similar manner to the way in which national central banks deal with currency speculators, relying heavily on the element of surprise to disturb speculators and discourage their involvement in oil markets. Given recurring allegations - particularly from Saudi Arabia and Venezuela - about the role of speculators in distorting oil prices, it's not surprising that this figures in the new operating style. Because it is a club without a fixed locale or a secretariat, ministers can discuss strategy by phone and meet informally and secretly as they did in Riyadh and Amsterdam. Such an organization would have considerable clout and a strong shared interest in exercising it to keep prices in a moderate range. The 10 countries potentially involved account for some 40% of world oil output, control roughly 70% of global oil reserves, and, with all agreed cuts, have spare capacity of nearly 3-million b/d. The final makeup of the group is still unclear, and it seems unlikely that Norway would join in any formal way. This year, Oslo's participation has been limited to one cut of 100,000 barrels a day, and that proved domestically contentious. Norway has long wavered on whether to throw in its lot with other exporters or, like its fellow North Sea producer the UK, keep both feet in the industrialized consumer camp. Following the 1986 oil price collapse, Oslo agreed to forego 7.5% of its output potential. But in 1993, it refused to join an attempt at a cut. c 1998 Energy Intelligence Group