Oil prices weaken after Saudi output pledge
Oil prices weakened slightly Thursday, a day after Saudi Arabia, the world's leading oil producer, said it favoured a "suitable increase" in OPEC oil production to stablise the market. However, analysts said they did not expect the price falls to be steep and they stressed that the Saudi Arabian pledge was vague.
They also cited the latest figures on US stocks from the Department of Energy that showed a smaller increase in stock levels than data released on Tuesday. By midday Thursday, Benchmark Brent crude for October delivery was trading in London at $31.83 a barrel, 15 cents lower. In New York, light sweet crude for October delivery ended Wednesday's session at $33.32 a barrel, 58 cents higher.
Prices initially dipped on Wednesday following stocks data from the American Petroleum Institute (API) that showed crude oil stocks rose by 5.261 million barrels in the week to August 25 to 286.0 million barrels.
Crude stocks were 31.70 million barrels lower than the previous year, the API said Tuesday. But data released by the US Department of Energy after Wednesday's market close showed a more modest increase of two 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.
Meanwhile, an official statement from Saudi Arabia announced that Oil Minister Ali al-Nuaimi had been instructed to hold talks with fellow members of the Organisation of Petroleum Exporting Countries to seek "a suitable increase (in OPEC output) to guarantee once again the balance on the market and stability of prices."
GNI Research in its daily note commented that "overall, the market still seems wedded to its uptrend and will clearly view any moderating comments from OPEC members with scepticism unless they are specific about their aims and how they intend to achieve them."
It added that "the quiet diplomacy which seems to have taken effect since the early July Saudi comments would suggest that traders will have to wait until the OPEC meeting (on September 10) before they will give any concrete information."
Saudi Arabia 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 extra oil has yet to be seen.
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. That 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.
On Wednesday, the OPEC basket of seven crudes stood at $31.70 a barrel, compared with $31.37 the previous day.
The basket has remained above the $28-level since the middle of August, meaning that an output increase would not be triggered until OPEC's ministerial conference in Vienna in September which will formally consider an output increase.
Analysts cautiously predict OPEC will agree to increase production by at least 500,000 barrels a day.
However, the organisation has already agreed two output increases this year and prices have stayed stubbornly high, with some OPEC members arguing that the problem is a shortage of specific refined products rather than an overall shortage of crude. - (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)