Crude Oil Prices Slide on Cautious Hopes of OPEC Output Increase

Published June 15th, 2000 - 02:00 GMT

Crude oil prices slipped lower Thursday in London trade, as expectations mounted that leading producer nations will agree to a modest output increase when they meet next week in Vienna. 

The price of benchmark Brent crude for July delivery slipped 25 cents to 30.77 dollars in London. 

In New York, light sweet crude ended the session on Wednesday 29 cents higher at 32.85 dollars a barrel. 

Analysts stress that the situation is extremely unclear and could depend on price movements in the run up to next Wednesday's meeting. 

However, they are increasingly forecasting that the Organization of Petroleum Exporting Countries (OPEC) will agree an output increase of at least 500,000 barrels per day to calm prices that in recent sessions have approached the nine-year high points of earlier this year. 

At its last meeting at the end of March, OPEC agreed effectively to restore output to levels before a series of cuts implemented in March 1999. 

Designed to revive a then-flagging market, the 1999 output regime led in early March to prices almost widely considered unacceptable of nearly 32 dollars a barrel in London and around 34 dollars in New York. 

Although initially stabilized by the March meeting, the market has since been fuelled by supply problems that spilt over from the previous cuts regime. 

In particular, the market has been propelled by a shortage of gasoline in the United States during the US driving season, with prices at the pumps reaching record levels. 

Leo Drollas of the Centre for Global Energy Studies forecast that next week's meeting will effectively implement an informal mechanism decided at the March conference, but stressed "we don't really know." 

The mechanism provides for an automatic increase of 500,000 barrels a day if prices remained above an average of 28 dollars a barrel -- or a decrease in production by the same amount if prices fall below 22 dollars a barrel. 

Despite sustained high prices, the mechanism so far has not been implemented. 

Officials have given various explanations of why OPEC has not acted and have said that the market had misinterpreted the mechanism. 

They have also argued supply difficulties are chiefly a local US affair and that the overall crude situation is adequate. 

Analysts add OPEC giant Saudi Arabia, the world's leading producer, prefers to retain control by preventing output increases independent of a formal meeting - LONDON (AFP) 

 

© 2000 Al Bawaba (www.albawaba.com)

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