Oil Rally Eases As OPEC Readies Supply
30 Dec 02(12:43 PM) |
NEW YORK (Reuters) - Red-hot world oil prices fell back on Monday as the OPEC cartel indicated its readiness to fill in supply gaps caused by a long strike in Venezuela and looming war in Iraq.
U.S. light crude futures in New York were down 46 cents at $32.26 a barrel at 1236 EST (1736 GMT), after falling as low as $32.00. London Brent crude was down 44 cents at $29.72 a barrel.
U.S crude earlier set a new two-year high of $33.65 a barrel as traders bet on a U.S. attack against Iraq early next year and as supplies from OPEC nation Venezuela stayed choked off by a strike now in its fifth week. Brent hit $31.02 a barrel, a 15-month high.
Prices slid as a senior delegate from a member of the Organization of the Petroleum Exporting Countries said OPEC is sure to raise oil output quotas by at least 500,000 barrels per day (bpd) unless prices drop heavily in the next two weeks.
"The 500,000 barrels a day is sure. More than that is subject to ministerial consultations which are already under way," the delegate told Reuters.
OPEC, which controls two-thirds of world crude exports, has pledged to plug any supply shortfall due to the strike in Venezuela, the cartel's third biggest producer. So far ministers have said there are no signs of any real shortage.
OPEC in December raised output quotas by 1.3 million barrels a day to 23 million bpd from Jan. 1. Quota-busting means actual output has been running at some 24.5 million bpd.
Algeria's booming oil exports are set to dip only marginally next month, keeping the country some 200,000 bpd over its new, higher OPEC quota, trading sources said.
Under an informal output mechanism, OPEC aims to keep the price of its reference basket of seven crudes in a $22 to $28 a barrel range by increasing supply if prices exceed the upper end of the band for 20 consecutive trading days.
The OPEC basket jumped to $31.06 Friday, the ninth day the reference price was above the target band. Unless prices drop sharply the 20-day target for the mechanism could be triggered in mid-January.
The OPEC delegate said oil ministers would not need to meet to raise output quotas by more than 500,000 bpd. "If they want to do more than that they can agree the volume by phone," he said.
ECONOMIC CONCERN
Oil has risen more than $5 in December and prices are now more than $10 higher than at the start of 2002. Concerns are growing that costly energy bills could stifle global economic recovery.
"Oil and politics are a volatile combination and we have two separate issues confronting the oil market at the moment," said Peter Gignoux, head of the London energy desk at Schroder Salomon Smith Barney.
Washington at the weekend ordered more U.S. troops, aircraft and ships to head to the Gulf from January in preparation for a possible war against Baghdad.
Secretary of State Colin Powell said Washington had not yet decided whether to attack Iraq to force it to disarm weapons of mass destruction, but was taking "prudent action" in readiness.
Dealers think an attack could start soon after Jan. 27 when the chief U.N. weapons inspector Hans Blix delivers a report to the Security Council on the progress of his inspections teams.
In Venezuela, opposition leaders extended a nationwide strike into Monday, marking the 29th day of action aimed at forcing the resignation of President Hugo Chavez and early elections.
The strike has closed most oil production and refinery operations in the world's fifth-biggest exporter and choked off overseas sales to 15 percent of normal levels.
A tough-talking Chavez Sunday showed no sign of meeting opposition demands. Chavez in a nationwide broadcast said he had no plans to step down and vowed to break the strike.
Data from state oil firm PDVSA and independent shippers showed government efforts to break the strike helped boost oil exports to about 520,000 bpd in the week to Dec. 29 compared with 260,000 bpd in the previous week.
Volumes remain way below November exports of about 2.7 million bpd.
Venezuela's energy minister said Monday the nation's crude output will rise to over a third of normal levels next week, but rebel employees of state oil firm PDVSA said government efforts to restart the strike-hit oil industry were failing.
"(We will be producing) 1.2 million bpd in the coming week," minister Rafael Ramirez told reporters. He said current output was between 600,000 and 700,000 bpd.