Oil Averages $18 In 1999

Friday, January 07, 2000
Oil prices in 1999 posted a 35 percent increase on average over 1998 in a triumph of output restraint by exporter group OPEC and key ally Mexico. International benchmark Brent blend for the year was averaging $18.00 a barrel near the close of business on the last trading day of the year. Brent averaged just $13.34 a barrel in 1998, the lowest in 22 years, when prices slumped amid global surplus caused by excess output and shrinking demand in collapsing Asian economies. Average prices for Brent were $19.34 in 1997 and $20.28 in 1996. "OPEC has succeeded beyond its own expectations in increasing prices and in reducing global crude inventories," said a report from Washington-based Petroleum Finance Company. "Prices have increased dramatically and demand has recovered." The rally has been driven by three rounds of output cuts brokered by Venezuela, Saudi Arabia and non-OPEC Mexico that have squeezed flows by some four million barrels per day (bpd). The gains have revived the balance sheets and share prices of international oil companies and service firms and replenished depleted treasuries in the oil-dependent OPEC member states. By cutting supply in 1999 by about four percent, OPEC boosted petroleum export revenues by some $25 billion, London's Center for Global Energy Studies estimated. Cartel oil revenues for the year were about $121 billion compared to $96 billion in 1998. But the rising prices have also stirred fears of resurgent inflation in industrialized countries and of fresh economic damage in Asia's convalescent economies. Brent crude futures in London on Thursday traded down 25 cents at $25.23 a barrel. Prices peaked at a nine-year high of $26.15 on December 16 having climbed from a low point of $9.80 in late February. Dealers are now keen to know whether OPEC will respond to dwindling oil stockpiles in the West by easing its supply curbs, scheduled to expire at the end of March. Some OPEC members have said the group might extend the curbs for several months but the exporter organization has yet to reach a consensus on future policy. Petroleum Finance said it believed OPEC was having difficulty in finding a consensus on market management objectives. "The stage seems set for an increase in OPEC production in the next three months, as negotiations to chart a new course for the organization continue. The magnitude of the increase is the real unknown," the company said. "The extra crude will find plenty of buyers in a tight market." Dealers noted fresh attention on Thursday on the plans of OPEC member Venezuela following mudslides that killed tens of thousands of people earlier this month. Venezuelan Energy and Mines Minister Ali Rodriguez said on Wednesday his country might seek to increase oil production to help pay for the billions of dollars of flood damage. But Rodriguez added Venezuela would raise production only if other members of OPEC proposed it, and later clarified that he would not ask OPEC to allow Venezuela to increase output.
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