Oil prices continue to fall, RI preps output cut proposal
A'an Suryana, The Jakarta Post, Jakarta
Oil prices fell still further on Tuesday as dealers again analyzed OPEC's decision on production quotas last week and concluded that the market was likely to stay awash with crude.
Meanwhile, Minister of Energy and Mineral Resources Purnomo Yusgiantoro said that if prices continued to fall, Indonesia would propose another output cut at the next June 11 Organization of Petroleum Exporting Countries meeting in Doha, Qatar.
He said that the government was closely monitoring price developments, and hoped that the price would not fall below US$22 per barrel.
Revenue in the current 2003 state budget is based on an assumed average oil price of $22 per barrel.
The price of benchmark Brent North Sea crude oil for June delivery dropped 20 cents to $23.15 per barrel in early deals in London, after hitting a five-month low of $23.05 earlier in the day, AFP reported. The price was still at more than $27 per barrel in the beginning of this month.
New York reference light sweet crude June-dated futures were down 38 cents at $25.11 per barrel in out-of-hours electronic trading, having fallen by 77 cents on Monday.
With little else moving the markets, prices were likely to drop further, said GNI-Man Financial trader Kevin Blemkin.
"It is all very quiet at the moment and we can see oil prices on the downside this morning," he was quoted by AFP as saying.
"I think we will look to test a 22.5 (dollar) level" for Brent crude, he added.
Prices have slumped since last week's unexpected decision by OPEC to raise output ceilings from June 1 while also clamping down on the flouting of quotas.
Although OPEC presented the decision as a production cut of 2.0 million barrels per day (bpd), the amount of oil currently being pumped out was far less than the cartel said, according to analysts at brokerage Sucden UK.
"This means that actual production in June will only fall by 600,000 bpd," they said in a note to clients.
"However price falls are limited by OPEC's pledge to cut output at a June 11 meeting if prices go too low," they added.
Iraq's oil also appears likely to flow sooner than expected, with British military officers in southern Iraq saying at the weekend that the main oil refinery there should resume operations for the domestic market within a week.
One of the few factors weighing in favor of a price rise is continued trouble in Nigeria, where around a third of the country's oil exports were halted last month due to a wave of ethnic and political violence.
On Tuesday Nigeria's oil industry workers' union said that strikers who have hijacked four offshore oil rigs and trapped 97 British, American and other expatriate workers had refused to negotiate with them.
On Monday, the Nigerian navy and Anglo-Dutch oil giant Shell said they had beefed up security on a massive floating oil station after a threat by armed militants to destroy it.