Prices Rise Over 30 Dollars a Barrel as OPEC Sits Tight

Published June 13th, 2000 - 02:00 GMT

Oil prices climbed to more than 30 dollars a barrel in London on Monday, as prospects of an output rise by major producers receded and a Norwegian oil strike threatened to disrupt supplies. 

The price of benchmark Brent crude was trading at 30.27 dollars a barrel, 69 cents higher. 

In New York, light sweet crude ended trading last week at 30.2 dollars. 

The levels are the highest since March, prior to an agreement by the Organization of Petroleum Exporting Countries (OPEC) to increase supplies to stabilize prices. 

The March meeting also established an informal mechanism to provide for an automatic output increase in the event of sustained high prices. 

However, OPEC last week did not act to raise supplies, despite the fact prices had theoretically remained high enough to trigger a rise. 

Analysts now say it is highly unlikely there will be any increase before OPEC's next meeting on June 21 and that it is not certain there will be a boost even then. 

GNI Research said in its daily note that it saw no early end to the high prices. 

"On a momentum basis, it has to be said that there appears to be no end to the current strength and certainly OPEC does not appear inclined to offer extra supplies." 

Analyst at the brokerage Lawrence Eagles added that a meeting between the US energy department and refineries, expected later on Monday, should be key in determining the true state of supplies. 

OPEC members have suggested current high prices are a reflection of the tightness of US gasoline supplies, rather than the overall crude supply situation. 

Meanwhile, the price of crude also remains buoyed, Eagles said, by a strike by Norwegian oil workers, although if output is threatened, the Norwegian government is expected to force workers to return to their jobs and go to mandatory arbitration. 

At the end of last week, the world's leading producer Saudi Arabia indicated it did not intend to call for an increase in production ahead of OPEC's June meeting. 

A Saudi oil source said: "The kingdom does not intend to put forward any proposal for a rise in production before an examination of the situation on the oil market at the OPEC ministerial meeting." 

OPEC said in March that it would increase or reduce output by up to 500,000 barrels per day if certain reference prices rose above 28 dollars for a 20-day period or fell below 22 dollars a barrel. 

By Wednesday, composite crude prices had stood at an average of 28.08 dollars for the previous 20 days. 

Eagles pointed out that the mechanism had never been formally adopted and that OPEC members had probably believed all along that the trading band was sufficiently broad for there to be no need to trigger an increase until the June meeting, or just before. 

He said of the mechanism: "It's a dead duck." 

Meanwhile, a report in the Middle East Economic Survey (MEES) on Monday supported the OPEC view that overall supplies are not lacking. 

It stated that in May OPEC crude oil production showed a "hefty" increase of 610,000 barrels per day (bpd) over April, two thirds of it from Iraq. 

Excluding Iraq that is an OPEC member, but is not bound by the quota system, the other 10 member states pumped 25.28 million barrels a day in May as against 25.07 million bpd the previous month, according to MEES estimates -- LONDON (AFP) 

 

© 2000 Al Bawaba (www.albawaba.com)

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