Oil Above $30 As OPEC Seeks Longer Cuts
LONDON (Reuters) - Oil markets roared above $30 a barrel for the first time
in nine years on Friday as OPEC oil ministers from Iran, Libya and Algeria
urged the cartel to prolong deep output cuts for another six months.
Brent benchmark crude for March leaped a full dollar higher to $27.11 a
barrel, its highest since the Gulf War in 1991, before slipping back to
$26.90 by 1535 GMT.
Signs that major OPEC producers will keep oil output curbs in place beyond a
scheduled end-March expiry has pulled already sky-high prices up another
four dollars 17 percent -- in just eleven days.
Gains found fresh impetus as Libyan Energy Minister Abdullah al-Badri told
Reuters by telephone from Tripoli that he had agreed with new Algerian Oil
Minister Chakib Khalil and Iran's Bijan Zanganeh to propose that OPEC extend
supply cuts until September.
The producer group's deal to slash more than four million barrels per day of
output has nearly trebled prices in less than a year, fuelling concern among
industrialized countries that world economic growth could suffer.
European Central Bank Chief Economist Otmar Issing said there was a danger
that a temporary rise in inflation due to surging oil prices would become
more permanent if it led to higher wage settlements.
``We see developments in headline inflation heavily impacted by oil prices,
which have tripled in 12 months,'' Issing said in London.
``We face a dangerous, fragile situation as wage negotiations are just
starting in Europe.''
A snowstorm barreling across the U.S. northeast has triggered even faster
price rises there, lifting U.S. light crude late on Thursday to just four
cents off the $30 mark.
Analysts warn that the longer the Organization of the Petroleum Exporting
Countries delays raising output, the more volatile the price of the
strategic commodity will become.
``The longer they wait, the more acute their problems,'' said Standard Bank
in London. ``Lower stocks promise only instability.''
``The lower stocks are drawn down below normal levels, the higher OPEC's new
output levels will eventually have to be, and the bigger OPEC's potential
LOW GLOBAL STOCKS
Behind the wave of buying are fears that world stocks have fallen too far.
Forecasts of abnormally cold weather in parts of the U.S. which consumes a
fifth of world oil can only squeeze supplies further and drain stocks at an
even faster rate, traders said.
Paris-based International Energy Agency (IEA), the west's energy watchdog,
warned on Thursday of a potential severe supply shortage if OPEC kept a lid
on production at current levels.
Global supplies could be as much as three million barrels per day below
demand in the first quarter and as much as 1.5 million bpd below
requirements in the second quarter, it said.
Saudi Arabian Oil Minister Ali al-Naimi, OPEC's most influential policy
maker, said last week that he was content with market conditions and could
see no reason to change production policy for the remainder of 2000.
OPEC is scheduled to decide policy at a meeting in Vienna on March 27.
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