Opec raises output, fails to curb price

Xxxx Xxxxx Xxxxxx xxxxxxxx at xxxxxxxxxxx.xxx
Tue Oct 31 21:44:31 MST 2000


Gulf News, Oct 31, 2000

Oil & Gas

Opec raises output, fails to curb price

London (Reuters) - Opec said yesterday it would raise production by two
per cent today to curb a price rally stoking fears of inflationary
damage to the world economy.

Analysts said the rise was unlikely to make much difference to the
volume of physical supply because most members, apart from Saudi Arabia,
are already pumping flat out.

International crude markets appeared sceptical about Opec's fourth
output rise this year, pushing benchmark Brent crude up 19 cents to
$31.16 a barrel as the market closed early due to commuter chaos in
London after a severe weekend storm.

Brent had fallen a dollar on Friday on expectations of the move. U.S.
light crude was 48 cents higher yesterday at $33.22.

Markets were concentrating instead on discussions at the UN's Iraq
sanctions committee on Iraq's plan to have customers pay for its oil in
euros rather than dollars from November 1.

Baghdad has signalled it will halt sales worth five per cent of
international crude trade if its request is not met, although it will
accept dollars for oil loading very early in November.

Dealers are also watching weather forecasts for signs of any winter cold
snap that could send heating oil prices higher at a time when stocks of
surplus petroleum are near 24-year lows.

Dealers took in their stride a statement by the Organisation of the
Petroleum Exporting Countries saying Opec President Ali Rodriguez had
written to members asking that steps be taken for a 500,000 barrels per
day (bpd) output hike from today.

"I don't think the hike will lead to any significant increase in
barrels," said Gary Ross, chief executive of Pira Energy Group,
referring to the latest hike.

Iran, Kuwait, Algeria and Qatar said they would contribute to the
increase in line with Opec's price stability pact. Saudi Arabia also
already has made clear it supports the additional supply.

"Iran will proceed with the earlier decision of Opec and supply our
share of the increase," Iran's Opec governor Hossein Kazempour Ardebili
told Reuters.

Already producing more than at any time in the past 20 years, some Opec
members say global crude supply is already more than sufficient to meet
world demand.

Three previous Opec increases since March were aimed at quelling a
relentless rally that has seen the highest prices since the crisis over
Iraq's 1990-91 occupation of Kuwait.

In Singapore, flagship medium sour Oman crude came under strong pressure
yesterday as buyers backed away in the face of ample supplies and
sellers slashed premiums in a bid to move December cargoes.

Major buyer China remained absent from the market, while Taiwan's state
Chinese Petroleum Corp (CPC) looked unlikely to reissue a tender to buy
December cargoes. CPC cancelled an earlier tender last Friday, saying
sellers' price indications were too high.

Traders said yesterday that CPC was negotiating for more crude supplies
from term sellers instead. The market had earlier banked on CPC taking
one to two million barrels in December.

"Oman is looking weak if Taiwan doesn't buy and it will probably head
into discounts. But it's just not there yet," one trader said.

Traders reported the lowest premium heard so far for a December Oman
cargo at MOG +2 cents, paid by a Taiwan refiner to an unidentified
seller. December Oman has largely traded between MOG +6 and +9 cents.

The same refiner was keen to buy one more Oman cargo, traders said,
adding that up to 10 Oman cargoes remain unsold.

Light sour Abu Dhabi crudes remain firm. A European major reportedly
sold on Friday 200,000 barrels December Murban at ADNOC +33 cents into

Some two cargoes each of Murban and Lower Zakum remain homeless with
sellers asking about ADNOC +30 cents, traders said. Asian light sweet
crudes rebounded strongly, led by strength in benchmark Malaysian Tapis.

Traders said that a million barrels of a combination cargo of Tapis and
Masa with a set December loading date was traded at Tapis APPI +16 cents
a barrel late on Friday. The deal was concluded between an Asian trader
to a Middle East trader.

Some traders, however, said the deal was overpriced due to logistic
advantages. "A normal Tapis cargo with no dates and no package deal
should be valued at around flat to +5 cents," one trader with an oil
major said.

"The market is still well supplied and there is not enough buyers to see
the market recover into those kind of premiums."

But even at flat levels Tapis is in better form compared with the poor
November market, where sellers were forced to discount by as much as 30

Australian crude sellers were also asking premiums, although few trades
were done on the key Cossack grade. Traders said only a single parcel of
600,000 barrels of December loading light kerosene-rich Griffin was sold
at Tapis APPI quotes +30 cents, from a Japan refiner to a Korean


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Xxxx Xxxxx Xxxxxx
PhD Student
Department of Political Science
SUNY at Albany
Nelson A. Rockefeller College
135 Western Ave.; Milne 102
Albany, NY 12222

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