Oil prices inch up after oil ministers meet

Oil prices inch up after oil ministers meet

TOKYO (Reuters): Crude oil prices edged higher in early Asian trade on Monday after ministers from three key oil-producing nations on Saturday reiterated their commitment to maintaining oil production cuts until March 2000.

But any bullish implications of the supply cut agreement were at least partially offset by a Venezuelan proposal on price targeting that hinted oil producers think prices have risen far enough.

The New York Mercantile Exchange's October crude oil futures had last traded at US$21.31 per barrel as of 0100 GMT on Monday on the ACCESS electronic after-hours trading system, up four cents from Friday's settlement in New York. The benchmark contract had traded between $21.24 and $21.35.

On Friday, the October crude futures settled 32 cents higher at $21.27 as players closed out short positions ahead of the weekend.

Oil ministers from Saudi Arabia, Venezuela and non-OPEC Mexico met in Caracas on Saturday to assess the world market and to discuss price and inventory levels.

In a joint statement after the meeting, the ministers said that, "The stability and sustainability of oil prices requires that the production cuts be kept in place until the end of March 2000."

While the declaration was supportive for crude oil prices, market participants were unsure how to react to a proposal by Venezuela for an automatic mechanism to manage oil supply so as to keep prices within a specified range.

"People didn't know what to make of it (the outcome of the Caracas meeting)," said a New York-based broker.

Traders said the band proposal would be bearish if target prices were set at relatively low levels, such as the $16-$20 per barrel band for benchmark North Sea Brent that was suggested by Venezuelan government sources after Saturday's meeting.

"Brent is already trading over $20," noted the broker, suggesting a sell-off was possible if the band proposal meant oil producers believed oil prices had peaked.

On Friday, benchmark October Brent settled at $20.76 per barrel at London's International Petroleum Exchange.

Venezuelan oil minister Ali Rodriguez said the price band idea was still at a very early stage.

Ali al-Naimi, Saudi Arabia's oil minister, said: "We have no conflict with the idea of the band. It is being put forward and it is being studied."

In after-hours ACCESS trading, volume was relatively brisk for early Monday trade, with 404 lots changing hands in the October contract as of 0108 GMT.