Oil Rises Slightly as OPEC Basket Price Drops Below Critical Level
(AFP, LONDON) - Crude oil prices rose slightly on the London market on Tuesday after OPEC's reference basket of crude oil fell below the critical level of $28 .
In London, the price of benchmark Brent crude for September delivery was showing a gain of 14 cents mid-afternoon at $28.70 a barrel.
In New York, light sweet crude for August delivery closed 57 cents lower on Monday at $30.83 a barrel.
London prices recovered from earlier losses after the price of OPEC's reference basket of crude oil fell below $28 . OPEC had previously said that if this basket price rose above $28 it would increase production by 500,000 barrels a day.
The basket price, calculated as an average of oil prices from the previous day, stood at $27.46 Tuesday, against Monday's figure of $28.84, OPEC said.
On Monday, OPEC President Ali Rodriguez said he had asked member states to prepare for a 500,000 barrel-a-day increase by the end of this month if prices, which have exceeded $30 a day in recent weeks, did not fall.
Analysts were perplexed by the latest price rise.
"It's a confusing situation. It's not clear if the mechanism will be suspended now that the OPEC basket price went below $28 ," said oil analyst Lawrence Eagles at brokerage GNI.
Analysts had expected OPEC to employ a price band mechanism, providing for an automatic output rise of 500,000 barrels per day if the price of a basket of OPEC crudes stays above $28 for 20 working days.
GNI Research earlier expressed scepticism that the output increase would come to pass.
"Some hawks, including Iran, might say no to the mechanism. The market is waiting for some news from Saudi Arabia," said Eagles.
© Agence France-Presse 2000
© 2000 Mena Report (www.menareport.com)