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Gold/Mining/Energy : Oil & Gas Price Economics -- Ignore unavailable to you. Want to Upgrade?

To: jackie who wrote (92)	4/22/1999 9:02:00 PM
From: Razorbak	Read Replies (2) \| Respond to of 350

FOCUS-Yamani, Lukman Warn of High Oil Price Danger Thursday April 22, 6:21 pm Eastern Time By Richard Mably LONDON, April 22 (Reuters) - OPEC producers should not allow oil prices to rise too far or they will sow the seeds of another damaging oil market slump, OPEC Secretary-General Rilwanu Lukman and former Saudi Oil Minister Zaki Yamani agreed on Thursday. The Organisation of the Petroleum Exporting Countries' new output curbs may usher crude prices to $18 a barrel by year's end but prices higher than that were no longer in the cartel's interest, said Lukman, a former Nigerian oil minister. ''Anything above that could be counter productive because it would encourage non-OPEC supplies, and while we expect OPEC members will stick to their agreement, let's say it might put some pressure on their restraint,'' he told Reuters in an interview on the sidelines of an oil conference in London. ''Engaging in a series of massive output cuts as OPEC has done over the last year or so will eventually push oil prices back up to $18 a barrel and perhaps send them beyond $20 a barrel, but can they be expected to stay there?'' asked former Saudi Oil Minister Zaki Yamani. ''Might not this policy carry within it the seeds of its own destruction?'' he told delegates at the Centre for Global Energy Studies conference. Caution among OPEC members over how far oil prices might rise as a result of the stringent new output limits they agreed in March contrasts with cartel celebrations when oil rose above $20 a barrel in 1996 and 1997. That high price, combined with a slump in Asian oil demand, brought extra output onstream to cause a market slump which last year cost OPEC more than $50 billion in lost revenues. Oil prices have risen swiftly since OPEC agreed lower exports, valuing benchmark UK Brent blend near $16 on Thursday from less than $10 in late February. ''Prices have already moved up more than 50 percent and we expect them to continue moving in that general direction. By the end of the year maybe they will be between $17 and $18,'' said Lukman. He said there were ''substantial indications'' that OPEC members were sticking by their pact and reducing supply as required from the beginning of April. ''Although there may be a temptation to produce a little bit more at higher prices, we know from experience that is counter productive,'' he added. Yamani said that an excessive price rise was guaranteed to restore confidence in high cost oil producing regions and sow the seeds of another downward cycle in boom-bust oil prices. ''The cuts do not constitute a long term therapy for OPEC's problem of stabilising its members' oil income but merely an analgesic to relieve the short term pain,'' he said. ''The danger if prices go too high is that countries outside OPEC that were forced to shut in production may be encouraged to come back,'' admitted Lukman. OPEC action in reining back supplies had sent other producers the message that the cartel would come to the rescue if prices dropped again, said Yamani. ''If oil producers outside OPEC are convinced OPEC cannot live with low oil prices ... then these producers will tend to undertake oil field developments on the assumption that oil prices will be supportive if not sooner than later.'' -------------------------------------------------------------------------------- biz.yahoo.com