Kuntoro against sharp rise in oil prices

JAKARTA (JP): Minister of Mines and Energy Kuntoro Mangkusubroto said he did not favor a sharp increase in oil prices for fear that it could hamper global economic growth.

Kuntoro said the ideal oil price level amid the economic recession would be between US$15 and $17 per barrel.

If oil prices went over that level "economic growth will not be optimal," Kuntoro said in a weekly press conference.

Oil prices have soared over the past several weeks following the Organization of Petroleum Exporting Countries (OPEC) cuts to production by 1.7 million barrels per day (bpd) starting from April 1. Non-OPEC countries, led by Norway and Mexico, have also agreed to cut their output by 400,000 bpd.

Indonesia agreed to reduce output by 93,000 bpd to 1.187 million bpd, excluding condensate, during OPEC's 107th ministerial meeting on March 23 in Vienna.

Reuters reported on Friday that Bellweather UK Brent blend crude for June traded up 31 cents to a high of $16.20 per barrel -- a price not seen since January 1998.

Dealers said a combination of technical factors and institutional investment purchases of oil futures in the wake of OPEC crude output curbs were behind the price rise.

Oil's lightning turnaround from 22-year lows was illustrated in the growing concerns among leading industry figures that prices might now be heading too high.

Producers should not allow oil prices to rise too far or they would sow the seeds of another damaging oil market slump, OPEC secretary-general Rilwanu Lukman and former Saudi oil minister Zaki Yamani both said in London on Thursday.

The new output curbs by OPEC might bring crude prices to $18 per barrel by year's end but prices higher than that were no longer in OPEC's interest, said Lukman, a former Nigerian oil minister.

"Anything above that could be counter-productive because it would encourage non-OPEC supplies, and while we expect OPEC members will stick to their agreement, let's say it might put some pressure on their restraint," he said on the sidelines of an energy conference in London.

Caution among OPEC members over how far oil prices might rise contrasts with cartel celebrations when oil rose above $20 a barrel in 1996 and 1997.

"Prices have already moved up more than 50 percent and we expect them to continue moving in that general direction. By the end of the year maybe they will be between $17 and $18," said Lukman.

He said there were "substantial indications" that OPEC members were sticking by their pact and reducing supply as required from the beginning of April.

Indonesia expected oil revenue at Rp 12.4 trillion for the fiscal year of 1999/2000, based on the oil price projection of $10.5 per barrel. (jsk)