Oil prices skipped higher in London on Monday, April 9, as rumors swept financial markets that Saudi Arabia's King Fahd had died. Riyadh quickly denied the rumors, saying the king of the world's largest oil producer was "alive and well."
But a barrel of benchmark Brent North Sea crude for May delivery nonetheless advanced 37 cents to $25.54. In New York, the May light sweet crude contract took on 58 cents to $27.64.
The rumor broke on Monday afternoon, and immediately jolted the oil market, because King Fahd's Saudi Arabia is an oil market lynchpin, the world's largest oil exporter and a key player in the Organization of Petroleum Exporting Countries (OPEC).
"There is a market rumor going round over the alleged death of royalty in Saudi Arabia," said GNI brokerage dealer Jim Chilcott. "It was only this rumor that the king had died which moved the market to start off with."
Riyadh quickly denied the reports, but oil futures remained well supported. "The rumors about King Fahd are false, we are very surprised at this," a top Saudi official told AFP in Riyadh. "He is alive and well."
The oil market remains well supported in any case currently because of high prices for refined products, particularly gasoline ahead of the US summer 'driving season' "The US is the main reason why we're up here," said Chilcott. "Unleaded gasoline is very very strong, up 100 points," he said.
Market players will thus pore over estimates for US crude and product reserves, which the American Petroleum Institute gives every Tuesday. Yet while gasoline stocks remain thin, dealers currently believe crude to be abundant because of doubts that OPEC will comply fully with the four-percent output cut agreed in Vienna last month, GNI brokerage analyst Lawrence Eagles said.
"OPEC members are back to their old ways — trying to eke out a bit of extra income but in the process collectively undermining prices to a degree that reduces earnings by a far greater proportion," he wrote in a research note.
The hole left by OPEC's production squeeze of one million barrels per day is also being offset by rising Iraqi exports. Iraqi exports have returned to normal after three months of disruption, the Middle East Economic Survey, MEES , reported Monday.
Although a member of the 11-member OPEC club, Iraq is excluded from the cartel's quota system, with its exports restricted under the United Nations oil-for-food deal set up in 1996.
A spat over pricing under the deal led Baghdad to halt exports temporarily last year and exports have been fitful since. Iraq has met its goal of securing an independent source of oil revenue outside UN control, the MEES said.
To escape the UN straitjacket, Iraq has found more than 100 companies — many virtually unknown to the oil industry — prepared to do deals openly but without any evidence they were paying the 25-30 cent surcharge outside UN accounts, the Nicosia-based specialist weekly said.
This could undermine efforts by OPEC to bolster prices going into the northern hemisphere summer, according to analysts. The group has slashed output by 2.5 million barrels a day so far this year in an effort to prop up its basket price around $25 a barrel.
OPEC's basket price of seven crudes worldwide eased to $23.54 a barrel on Friday, from $23.95 on Thursday, the OPECNA agency reported. — (AFP, London)
by Marie Wolfrom
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)