news.bbc.co.uk Monday, 13 January, 2003, 05:59 GMT

Increased supplies are little comfort for the US

Oil prices have remained unmoved as Organisation of the Petroleum Exporting Countries (Opec)'s agreement on Sunday to increase supplies is considered inadequate to meet US needs.

Oil has been trading at about $30 per barrel as a US war with Iraq and strike in Venezuela, the world's fifth largest exporter, has pushed US reserves to near 26-year lows.

Opec "stabilising" supplies

"There are delays in getting oil from the Middle East to the US," said David Thurtell, commodities strategist at the Commonwealth Bank in Sydney.

"The global market is going to remain tight with ongoing war fears," he added.

Deliveries from the Middle East take between four to six weeks to reach the US.

US light crude see-sawed in Asian trade, falling by almost 50 cents to $31.20 a barrel, then rising above its opening price before returning to $31.68 at 0512 GMT.

Trade on the International Petroleum Exchange (IPE) in London, the world's main oil market, begins at 0900 GMT.

Supply threats

The Venezuelan strike and the looming threat of war had pushed US crude prices to a two-year high of $33.65 at the end of December.

The high cost of oil could threaten the global economy which is still struggling to show any significant growth.

Oil shipments by Venezuela, the world's fifith biggest exporter which supplies 13% of US needs, still down to about 20% of normal export levels.

Iraq sells up to two million barrels per day on the international market but that would be stopped if there was a war.

Opec increased official production by 1.5 million barrels per day (bpd) during the emergency meeting in Vienna.

"Opec is trying to send a very strong message that it will do its utmost to stabilise demand and supply," said the cartel's president Abdullah bin Hamad Al Attiyah.

Another Opec meeting is scheduled on 11 March.

sg.biz.yahoo.com Monday January 13, 12:20 PM

SINGAPORE (Dow Jones)--Crude futures on New York Mercantile Exchange fell early Monday as after-hours Access trading commenced, in a knee-jerk reaction to news the Organization of Petroleum Exporting Countries will hike its output ceiling by 6.5% to stabilize jittery oil markets.

But crude futures subsequently managed to recover some of the earlier losses as participants realized the selling was overdone, and the size of the output hike was in line with what the market had been expecting.

But even though the OPEC output rise was within expectations, the news will continue to weigh on crude futures, participants say.

Select from the most reliable agencies  At 0410 GMT, the February Nymex contract was trading at US$31.56 a barrel, down 12 cents from Friday's floor trade close, after falling as much as 45 cents to US$31.23/bbl early in the session.

"Basically we sold off on the back of the OPEC news, and the general perception was that the market was overdone," said a Nymex broker, explaining the early losses in the session.

"But the market was expecting an increase of 1.5 million b/d, so there was no reason to sell off 50 cents at the open. The market overreacted to the headlines, because (an output hike of 1.5 million b/d) was already priced in," he added.

Most of the trading volume was from the U.S., with a total of 2,189 lots traded shortly before midday in Singapore.

"It could be that the U.S. (participants) are a little less aware of what's going on with OPEC ... and have pushed the market down. While in the Far East, Europe, (traders) have already priced it down," the broker said.

Range-Bound Trade Likely

For the rest of the Access trading session, Nymex crude futures will likely hold in a US$31.55-US$31.70/bbl, trending to slightly lower as news of the OPEC output hike puts a slight damper on market sentiment.

"Regardless of the fact that the market has already priced in (the 1.5 million b/d output hike), the news is going to cause a little bit of bearishness," the broker said, adding reports that Venezuela loaded a ship Friday also weighed on the market.

Good support will be provided at US$31.20/bbl, a consistent technical level "on the up and down swings over the last couple of weeks," the broker said. Beyond that, US$30.60/bbl will provide further support.

"At the moment we're in a little of a downtrend that's a week and a half old. To break out of that, we're looking at a move back up above US$32.40/bbl, and we have to get through US$32.60/bbl," he said. "But until we get through there, it's going to range trade and hover around current ranges."

On the London International Petroleum Exchange, Brent crude futures will also likely trend modestly lower. On Friday, nearby February Brent ended at US$29.67 a barrel, up 3 cents.

At its extraordinary meeting in Vienna Sunday, OPEC settled for a hike of its output ceiling by 1.5 million barrels a day to 24.5 million b/d, effective Feb. 1.

Oil prices have risen in recent weeks as the disruption to Venezuelan oil exports due to a prolonged strike in that country tightened supplies, notably to the key U.S. market.

Sunday's agreement was pushed through by Saudi Arabia, OPEC's largest exporter. Ali Naimi, the Saudi oil minister, said the supply shortfall resulting from the Venezuelan political crisis amounted to 2 million b/d.

He pledged that OPEC wouldn't allow an actual shortage of oil to develop.

The OPEC decision was swiftly followed up on Monday by the Saudis, who told South Korean costumers that in February they would supply more crude oil under their long-running term contracts than they had in January.

Saudi Arabian Oil Co. (C.SOI), or Saudi Aramco, made a 5% cut to February-loading term crude supplies to South Korea, compared with a much sharper 21%-22% cut for January's supplies, Seoul-based traders said Monday.

"The small cut means more term crude supplies given to us by Saudi Aramco, in line with OPEC's decision to increase output," a South Korean buyer said.

The same proportionate change is expected to apply to Saudi Arabia's February-loading term crude supply for Japan and Taiwan. Japanese markets are closed Monday.

-By Irene Kwek, Dow Jones Newswires; +65-64154062; irene.kwek@dowjones.com

www.morningstar.ca 12 Jan 03(10:19 PM) |  E-mail Article to a Friend

By Tanya Pang

SINGAPORE (Reuters) - Oil prices held steady on Monday, shrugging off OPEC's weekend pact to raise supplies as being too little, too late to lift wafer-thin U.S. fuel stocks anytime soon.

The Organization of the Petroleum Exporting Countries agreed at an emergency meeting in Vienna on Sunday to increase official production limits by 1.5 million barrels per day (bpd) to compensate for six weeks of losses in strike-bound Venezuelan supplies.

U.S. light crude tumbled almost 50 cents in early trade to an intraday low at $31.20 a barrel, but quickly recovered to stand six cents down at $31.62 at 0245 GMT.

Analysts said prices were little changed as traders saw no short-term relief for U.S. crude inventories, which are hovering just above 26-year lows as the stoppage in Venezuelan exports eats into supplies to the world's biggest oil consumer.

Oil from Middle East suppliers takes four to six weeks to reach U.S. shores, while Venezuelan supplies, which account for 13 percent of U.S. imports, arrive in about five days.

"There are delays in getting oil from the Middle East to the United States, plus OPEC's agreement is for 1.5 million barrels per day, but prior to the strike Venezuela production was about 2.5 million," said David Thurtell, commodities strategist at Commonwealth Bank in Sydney

"The global market is going to remain tight and with ongoing war fears, you've got to be pretty brave to sell oil at the moment," said Thurtell.

ALARM BELLS

The Middle East-dominated cartel fears an oil price shock if a U.S.-led war in Iraq should come before Venezuelan supplies are restored.

Venezuela, OPEC's third-biggest producer, is fifth in world exporter rankings, while Iraq sells up to two million bpd overseas, which could be disrupted if war breaks out.

The strike and the looming threat of war pushed U.S. crude to a two-year high at $33.65 at the end of December, setting off alarm bells that a run of high energy bills would damage the fragile global economy.

OPEC President Abdullah al-Attiyah said on Sunday OPEC would meet again if Venezuela restores full production. OPEC has scheduled an ordinary ministerial meeting for March 11.

OPEC's agreement brings the cartel's official production ceiling for its 10 members bound by quotas to 24.5 million bpd. Iraq sells oil under the United Nations' oil-for-food program and is excluded from OPEC's quota system.

Analysts saw little chance of prices heading below $30 despite the additional OPEC crude. Actual new oil to hit the world's 76 million bpd market would be limited, they said.

OPEC's latest increase was divided pro-rata among members, meaning Venezuela was also granted its share of the higher output limit despite the strike, which entered its 43rd day on Monday and has slashed oil exports to roughly one-fifth, or 500,000 bpd.

Many others in OPEC have little, or no, spare capacity to bump up production.

"I certainly see oil staying above $30 until the Venezuelan situation is sorted out," said Paul Ashby, oil and gas analyst at ABN Amro in Sydney.

economictimes.indiatimes.com REUTERS[ MONDAY, JANUARY 13, 2003 08:31:31 AM ]

SINGAPORE: Oil prices held steady on Monday, shrugging off Opec's weekend pact to raise supplies as being too little, too late to lift wafer-thin US fuel stocks anytime soon.

The Organization of the Petroleum Exporting Countries agreed at an emergency meeting in Vienna on Sunday to increase official production limits by 1.5 million barrels per day (bpd) to compensate for six weeks of losses in strike-bound Venezuelan supplies.

US light crude tumbled almost 50 cents in early trade to an intraday low at $31.20 a barrel, but quickly recovered to stand six cents down at $31.62 at 9:45 PM EST Sunday.

Analysts said prices were little changed as traders saw no short-term relief for US crude inventories, which are hovering just above 26-year lows as the stoppage in Venezuelan exports eats into supplies to the world's biggest oil consumer.

Oil from Middle East suppliers takes four to six weeks to reach US shores, while Venezuelan supplies, which account for 13 per cent of US imports, arrive in about five days.

"There are delays in getting oil from the Middle East to the United States, plus Opec's agreement is for 1.5 million barrels per day, but prior to the strike Venezuela production was about 2.5 million," said David Thurtell, commodities strategist at Commonwealth Bank in Sydney

"The global market is going to remain tight and with ongoing war fears, you've got to be pretty brave to sell oil at the moment," said Thurtell.

Alarm Bells

The Middle East-dominated cartel fears an oil price shock if a US-led war in Iraq should come before Venezuelan supplies are restored.

Venezuela, Opec's third-biggest producer, is fifth in world exporter rankings, while Iraq sells up to two million bpd overseas, which could be disrupted if war breaks out.

The strike and the looming threat of war pushed US crude to a two-year high at $33.65 at the end of December, setting off alarm bells that a run of high energy bills would damage the fragile global economy.

Opec President Abdullah al-Attiyah said on Sunday Opec would meet again if Venezuela restores full production. Opec has scheduled an ordinary ministerial meeting for March 11.

Opec's agreement brings the cartel's official production ceiling for its 10 members bound by quotas to 24.5 million bpd. Iraq sells oil under the United Nations' oil-for-food programme and is excluded from Opec's quota system.

Analysts saw little chance of prices heading below $30 despite the additional Opec crude. Actual new oil to hit the world's 76 million bpd market would be limited, they said.

Opec's latest increase was divided pro-rata among members, meaning Venezuela was also granted its share of the higher output limit despite the strike, which entered its 43rd day on Monday and has slashed oil exports to roughly one-fifth, or 500,000 bpd.

Many others in Opec have little, or no, spare capacity to bump up production.

"I certainly see oil staying above $30 until the Venezuelan situation is sorted out," said Paul Ashby, oil and gas analyst at ABN Amro in Sydney.

www.guardian.co.uk Mark Milner and Charlotte Denny Monday January 13, 2003 The Guardian

The Organisation of Petroleum Exporting Countries last night handed a lifeline to the struggling global economy with a deal to raise output and keep a lid on the oil price.

The producers' cartel agreed to increase production by about 1.5m barrels a day at an emergency meeting held in Vienna yesterday - an increase of 7%.

"We hope the agreement will produce a reasonable price for consumers and send a very strong message to the market to prevent panic," Opec president Abdullah al-Attiyah said after the deal was announced.

With the oil price over $30 a barrel as a result of fears of a US-led attack on Iraq and the long-running strike in Venezuela which has disrupted supplies from the world's fifth-largest oil exporter, markets had been watching keenly for a deal.

"Opec has proved responsive, and that's good news for the world economy," said Peter Gignoux at investment bank Salomon Schroder.

Although the agreement - which was at the top end of expectations - will ease the pressure, analysts noted that the promised increase is below the estimated 2m barrels a day shortfall caused by the problems in Venezuela.

The deal to raise output levels will bring relief to both global economic policymakers and motorists.

Petrol pump prices are not directly linked to the spot market price of oil, but a sustained movement in the price does eventually feed through to garage forecourts.

With the world's leading economies struggling for growth there had been concern that a sharp increase in the oil price could stall the global financial system.

Opec's position is crucial, because although it accounts for less than half global oil output most of the world's spare capacity lies within its ranks, particularly in Saudi Arabia.

The cartel has effectively acknowledged for some time that higher prices and a corresponding downturn in the global economy are not in its own best interests. It has set a target range of between $22 and $28 a barrel, well below the $33 seen recently.

Saudi oil minister Ali al-Naimi played down supply concerns, saying: "There is no shortage. We never allowed the shortage to take place."

The Saudi minister said that his country would able to raise output to 10m barrels a day - about 2m above the average for December - within two weeks, although maintaining production at a higher level would take longer.

However, the Opec production agreement does not mean that prices are likely to fall back sharply in the short term.

An assault on Iraq would cut global production by about 2m barrels a day, and it is far from clear how soon Venezuela will be able restore pre-strike output levels.

Although the country's oil minister says that output is still running at 800,000 barrels a day and could be back to 2.5m barrels by the middle of next month, many analysts believe that his views are overly optimistic.

"The oil market is still tight," says Gary Ross, chief executive of the American consultancy, Pira Energy.

"This [deal] will provide some relief, but the extra will not arrive until the end of the first quarter."