Oil prices stay high despite Saudi output promise
Oil prices remained high, as a vague pledge from the world's leading oil producer, Saudi Arabia, to ensure a "suitable increase" in output weakened prices only slightly and stocks continued to hover around a 24-year low. Prices climbed over $31 a barrel in London and above $33 in New York.
Analysts increasingly predicted that the Organisation of Petroleum Exporting Countries (Opec) would agree to a modest output increase when it holds its ministerial conference in Vienna on September 10.
However, they also predict that extra oil would fail to boost stocks sufficiently, especially in view of specific product shortages, notably of heating oil.
Heating oil stocks are 40% lower than this time last year.
OIL: Hot. Oil prices remained high as US stock levels hovered around 24-year lows, although they weakened slightly late in the week following the latest pledge from Saudi Arabia, the world's leading oil producer, that it would work to stabilise the market.
Benchmark Brent crude for October delivery was trading at $31.59 a barrel compared with 30.42 a week earlier. In New York on Thursday, light sweet crude for October delivery ended the session at $33.12 a barrel, compared with $31.63 the previous week.
Slight price falls were triggered on Wednesday after Saudi Arabia said it favoured a "suitable increase" in production by Opec which is scheduled to hold its ministerial conference on September 10.
An official statement announced that Oil Minister Ali al-Naimi had been instructed to hold talks with fellow Opec members to seek "a suitable increase (in Opec output) to guarantee once again the balance on the market and stability of prices.
But falls were limited as analysts stressed that, even though they ultimately expected more oil will be forthcoming, the Saudi pledge was vague.
Prices were also supported by the latest figures on US stocks from the Department of Energy that on Wednesday showed a smaller increase in stock levels than data released on Tuesday by the American Petroleum Institute (API).
The US Department of Energy reported that crude stocks increased by 2 million barrels to 286.7 million in the week ending August 25 from the previous week.
Year-on-year, crude stocks fell by 32.2 million barrels, the department said.
Those figures compared with data from the API, showing that crude oil stocks rose by 5.261 millionn barrels in the week to August 25 to 286.0 million barrels.
Crude stocks were 31.7 million barrels lower than the previous year, the API said.
Saudi Arabia also triggered a dip in prices at the start of July when it made an earlier pledge to bring about an output increase of 500,000 barrels a day if needed to stabilise the market.
The initial reaction of fellow Opec members was to denounce Saudi Arabia's "unilateral" stance, although they later promised more oil under the terms of the organisation's price band mechanism.
Moreover, reports have suggested that Saudi Arabia has already been pumping 500,000 barrels more than its official Opec quota.
Opec's price band mechanism provides for an automatic output increase of 500,000 barrels per day if the price of a basket of Opec crudes remains above $28 for 20 consecutive days.
The basket has held above that level since mid-August and the mechanism could theoretically be triggered on September 8, but that would be only just before the Opec ministerial meeting that will formally consider an output increase.
Although Opec has already increased output twice this year, prices have remained high.
Opec members and analysts have blamed shortages of specific products rather than an overall lack of crude. They have stated that the most pressing current problem is low heating oil stocks ahead of winter in the northern hemisphere.—AFP
©--Agence France Press
© 2000 Mena Report (www.menareport.com)