Oil price remains high as Saudi Arabia hints at production rise
The price of oil was the highest for 10 years here on Tuesday after Saudi Arabia said it was ready to increase its output of oil immediately to hold the price down.
Prices fell slightly initially and benchmark Brent North Sea crude for November delivery was being traded at 34.38 dollars a barrel, against 34.46 dollars at the close on Monday.
In New York, the price of light sweet crude for October delivery briefly topped 37 dollars a barrel Monday and then settled at 36.88 dollars, a jump of 96 cents from the closing price on Friday.
Saudi Arabia was working hard to talk down prices while Iraq threatened to hold up its own exports because of a dispute over drilling rights with neighbouring Kuwait, analysts here said.
Markets remain "nervous" because of low world stock levels as the industrialised northern hemisphere moves into a winter quarter, the chief economist at the London-based Centre for Global Energy Studies, Leo Drollas, said.
On Monday, Saudi Crown Prince Abdullah bin Abdel Aziz, speaking in Brazil, said that his country was ready to increase oil output immediately to contain the price of crude oil.
And Saudi Arabian Oil Minister Ali al-Naimi suggested that oil prices would drop to 25 dollars a barrel.
Members of the Organisation of Petroleum Exporting Countries (OPEC) had agreed to increase production by 800,000 barrels a day, starting next month, in view of the low world stocks and rising prices which have sparked a wave of protests across Europe.The Saudi Arabian declarations "have a general influence over the prices", an analyst at Prudential Bache brokerage, Tony Machacek, said.
"Over the next few days, (the price) is going to drift under the 34 dollar (level), around 33.5 dollars, but it will come back later," he said.Drollas suggested the statements were mostly meant to serve as a psychological damper on prices and, while Saudi Arabia could very rapidly increase production from 8.7 million barrels a day to 10.5 million barrels, it worried that the current boom in oil could be followed by a bust.
"They have a great fear that if they put out too much now, there will be a slump next year," he said.Analysts suggested that demand for oil might be much weaker in the first quarter next year.
Meanwhile, they thought prices would remain high while consumer countries await the arrival of extra production supplies whose shipping requires from four to eight weeks.
Oil prices could climb even higher in coming months because of the limited capacity of many producers and the relatively low level of stocks, the International Monetary Fund for its part warned in Prague on Tuesday.
The Fund said in its semi-annual World Economic Outlook report that oil prices this year would be 47.5 percent higher than prices in 1999 when the price rose by 37.5-percent, and would decline by 13.3 percent in 2001. That compared with its April forecast of a 12.4-percent rise in 2000 and a 5.9-percent rise in 2001.
Oil prices have more than tripled since March 1999, when OPEC cut output to revive prices flagging around the 10-dollar per barrel level.Japanese Prime Minister Yoshiro Mori said on Tuesday he was worried about oil prices surpassing 10-year highs but discounted the need to stockpile crude.
"I believe that's something we have to be concerned about," Mori told reporters, according to Jiji Press news agency, when asked whether the surging oil prices would harm the Japanese economy.—AFP.
©--Agence France Presse.
© 2000 Mena Report (www.menareport.com)