Wednesday, January 08, 2003

Jan 08/03 - On a crude attempt by Venezuelan fools to manipulate crude prices

PMBComment: OPEC Secretary General Silva-Calderon was previously Venezuela’s Minister of Energy. He replaced Ali Rodriguez in both jobs. Ali Rodriguez (a.k.a. Comandante Fausto, or more recently “Ali, the boss of 40 thieves”) is the inept and obstinate former guerilla that is adding the destruction of PDVSA to his long list of unpaid crimes, has made a great deal of friends among some of PDVSA’s fiercest competitors that see a great competitor destroyed by a CEO whose true calling and pecuniary interests will be understood and discovered sooner rather than later. PMB

Middle East Online

2003-01-08

OPEC's Calderon cautious over output hike

Secretary General says large increase or cut in output should be carefully evaluated as oil prices drop again.

--------------------------------------------------------------------------------

VIENNA & LONDON - OPEC Secretary General Alvaro Silva-Calderon remained cautious Thursday over the Organisation of Petroleum Exporting Countries' plan to hike its oil output at an extraordinary meeting on Sunday.

"Any larger increase or cut in output (than 500,000 barrels a day) has to be carefully evaluated within the prevailing circumstances," Silva-Calderon told the cartel's OPECNA news agency in Vienna.

In March 2000, OPEC agreed to a price band mechanism under which the cartel would raise output by 500,000 barrels per day if prices remain above the range of 22 to 28 dollars for more than 20 consecutive trading days.

The mechanism also sets out that OPEC would cut its output by the same amount if prices fell below 22 dollars for 10 consecutive days.

On Tuesday the price of OPEC's reference basket of seven crude oils remained above 28 dollars for the 14th consecutive trading day. If prices continue at these levels, the 20th day will fall on January 15.

OPEC looks set to substantially hike its production at its extraordinary ministerial meeting in Vienna on Sunday, to respond to growing demand sparked by the general strike in Venezuela and the threat of war in Iraq.

"It is a difficult situation we are in, since we are dealing with a market affected by a set of extraordinary circumstances that are beyond our control," Silva-Calderon said.

OPEC's current official output quota is set at 23 million barrels a day excluding Iraq.

Oil prices slid on Tuesday after OPEC announced it planned to hike its production levels in order to bring down prices, which had reached particularly high levels in recent weeks.

In New York, reference light sweet crude for February delivery dropped by 98 cents a barrel to 31.08 dollars, while the OPEC reference basket of seven crude oils dropped 17 cents to 29.72 dollars.

Meanwhile, oil prices dropped sharply for the third day running on Wednesday as speculation persisted that OPEC members were poised to agree to hike output at the cartel's extraordinary meeting in Vienna this weekend.

The price of benchmark Brent North Sea crude oil for February delivery fell to 28.92 dollars a barrel from 29.33 at the close of trading on Tuesday, leaving the contract nursing a six percent loss since the start of the week.

In New York, light sweet crude February-dated futures plunged 1.02 dollars a barrel to 31.08 dollars on Tuesday, and was expected to fall further when trading resumed Wednesday.

GNI analyst Lawrence Eagles said the key issue for the market in the immediate future was how much more oil members of the OPEC cartel would agree to pump when they meet on Sunday.

"While more oil will clearly be provided, we doubt that the official quota rise will be more than 1.5 million barrels per day," Eagles said.

As a result, he said, world supplies were unlikely to be much higher than those seen in December.

"That is not enough considering the extra demand that is being seen as consumers and governments stock up ahead of an expected war with Iraq," Eagles added.

OPEC looks set to substantially increase production to respond to growing demand sparked by a general strike in Venezuela and the threat of war in Iraq.

Kuwait said on Wednesday it supported an OPEC output increase of one million barrels per day (bpd), believing that would be enough to calm the sharp rise in world prices.

"The State of Kuwait backs an OPEC production increase of some one million bpd," acting oil minister Sheikh Ahmed Fahad al-Ahmed told the official KUNA news agency.

Sources close to the cartel have said that Saudi Arabia, the world's leading oil exporter at some 7.5 million barrels a day, is calling for a total output increase of 1.5 million barrels a day.

The Saudi proposal is backed by Qatar, which currently holds the rotating OPEC presidency.

The other nine member countries are in favour of a production hike of one million barrels a day, the sources said.

Eagles said the release of weekly US inventory statistics, due later on Wednesday, would be closely scrutinised for evidence that traders were offsetting lower Venezuelan imports with alternative supplies of crude.

He said the market was expecting a five-million-barrel decline in crude stocks, which would be only partially offset by higher stocks of both gasoline and distillate fuels.


Read more of this PMBComment!
Creative Commons License
This work is licensed under a Creative Commons Attribution 2.5 License.