Asia oil price rebounds from nine-year lows
Asia oil price rebounds from nine-year lows
SINGAPORE (Reuters): Crude oil prices in Asia rebounded from nine-year lows yesterday as OPEC quota-buster Venezuela said it was trying to secure a global producer agreement to cut two million barrels per day of oil supplies.
The Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers could meet soon, which prompted oil players to start buying oil in expectation of supply cuts.
The Venezuelan comments gave the sagging oil market the most bullish news in some weeks.
New York Mercantile Exchange (NYMEX) April crude futures, trading in Asia on the electronic ACCESS trading system, were up 27 cents per barrel at US$13.48 at 0800 GMT.
Prices had been as high as $13.65 on reports that OPEC and non-OPEC could meet as soon as this weekend in Riyadh.
But an OPEC delegate denied the reports, which took the top off oil prices for the day in Asia.
However, Venezuelan Trade and Industry Minister Hector Maldonado told Reuters on Tuesday that a meeting was expected soon.
North Sea Brent blend futures, quoted on the Singapore International Monetary Exchange (SIMEX) were also higher. May was quoted at $12.30/$12.58 per barrel at 0800 GMT after London closed at $12.26.
"The market is extremely short. There are so many shorts out there that with this meeting there are a lot of people who have to cover positions," said Joe Posillico, a broker with ED&F Man in New York.
He was referring to oil players who had taken up positions expecting oil prices to fall now needing to cover those bets.
Both New York and London prices fell overnight to fresh nine- year lows as global over-supply extended its influence on the market.
World storage tanks are brimming and there appears to be little restraint among oil producers.
The falling oil prices would severely affect some oil producing countries whose oil revenue contributes significantly to their coffers like Indonesia.
Indonesia's 1998/1999 budget, which balances at Rp 147.22 trillion (US$US$14.7 billion), assumes that oil prices should average at $17 per barrel. Domestic revenue from the oil sector is targeted at Rp 34.06 trillion, or 16.3 percent of the total budget.
Price rally
However, prices started to rally late in New York on Tuesday after Luis Giusti, president of Venezuelan state oil firm Petroleum de Venezuela (PDVSA), said the South American producer was seeking agreement between OPEC and non OPEC to cut "anywhere between 1.5 and 2.0 million barrels a day" from world supplies.
Speaking to Belgian business executives, he said such an accord would push Brent prices as high as $14.50 to $15.50 per barrel during 1998.
Man's Posillico said once short positions were covered the market was likely to adopt a holding pattern to see how Venezuela's proposal developed.
"We have to see what they actually do," he said.
OPEC has been wracked by indecision on how to deal with the slump in oil prices.
Brent has dropped a massive 45 percent in value since early October, hit by a mild winter in the northern hemisphere, higher official OPEC supply and rampant overproduction, plus a slump in Asian oil demand.
The United Nations has raised the value of the oil-for-food deal to more than $5 billion from $2 billion each six months, raising the prospect of extra supplies from Iraq.
Saudi Arabia, the OPEC kingpin, has said it will not cut output only to find other OPEC producers who do not adhere to their quotas and non-OPEC producers taking the kingdom's market share.
Analysts estimate that OPEC produced 28.69 million barrels per day in February, well above the supply ceiling of 27.5 million.
Venezuela has openly admitted it produces above its OPEC quota of 2.58 million bpd. Analysts estimated its February production at 3.36 million bpd.