OPEC members set to extend production cuts
OPEC members set to extend production cuts
SINGAPORE (Reuters): Asian crude prices rose on Tuesday
following overnight gains as production curbs now in place looked
set to be extended.
Kuwaiti Oil Minister Sheikh Saud Nasser al-Sabah said on
Tuesday that fellow OPEC members had agreed in principle to
extend the cuts beyond March 2000. He said OPEC would decide on
the duration of the extension at its ministerial meeting in
March.
December New York Mercantile Exchange (NYMEX) crude futures
traded at US$23.38 by 0745 GMT, 11 cents over its settlement in
New York on Monday.
Prices had risen in New York trade, ending the day 27 cents
firmer than on Friday, supported by firm indications from OPEC
heavyweights that supply curbs would be extended.
"It depends on the level of stocks in March and the price. If
these two factors are like (they are) now, it is probable we will
extend our pledge," Iranian Oil Minister Bijan Zanganeh said on
Sunday, after a meeting with his Saudi Arabian counterpart Ali
al-Naimi.
Oil prices are a far cry from the historical lows reached
almost a year ago, when U.S. crude traded at just $10.35 per
barrel in December 1998.
Relatively high compliance by OPEC to the output cuts -- of
over 80 percent -- and the probability of a cut extension
maintained a price rally that had threatened to fizzle out
following a speculative sell-off in September.
But while analysts expected oil prices to remain firm in the
fourth quarter, they said it was difficult for prices to be
sustained above late September's highs, when U.S. crude was at a
32-month peak of $25.12.
"I think the chances of surpassing that level for a long
period of time is very low, because that's outside everyone's
comfort level on crude oil prices," said James Brown, regional
energy analyst for Merrill Lynch.
Analysts said the price surge in September was largely the
result of massive buying by speculators, who were presently much
less active in the oil market.
It is probably not yet time for oil prices to head back
downwards, as oil stocks in industrial countries are falling
sharply and OPEC countries' compliance with cuts is better than
previously thought, the International Energy Agency said on
Tuesday.
Doubts about output by OPEC members sent prices tumbling 10
percent in early October, but "OPEC compliance has not dropped as
much as some believed, and OECD stocks are indeed shrinking," the
said in its monthly oil market
report.
"So, the turning point for prices has probably not come yet."
The IEA said last month that OPEC compliance with its agreed
output cuts had fallen to 86 percent in September, but Tuesday's
report revised this up to 91 percent, close to the previous
months' level, and said compliance in October had fallen slightly
but was still 87 percent.