Prices Stay High As OPEC Plans To Maintain Curbs

Oil prices marched boldly along near 32-month highs last week after key OPEC exporters said output cuts should be kept in place until March next year. On Sept. 14 Benchmark Brent blend for delivery in October was trading 20 cents firmer at $23.68 a barrel, just four cents off a 32-month high touched the day before. Brokers cautioned that technical factors to do with the expiry Sept. 15 of the October contract on London's futures market had inflated Brent's value. However, they agreed the trend was moving in favor of the Organization of the Petroleum Exporting Countries, the producer group of Middle Eastern, Asian, African and Latin American countries responsible for 60 percent of the world's oil exports. "I wouldn't pay too much attention to October, but short-term the market looks as though it could strengthen further," said Christoper Bellew, a director at brokers Prudential Bache International. OPEC wants to keep its curbs in place for a while yet to repair serious damage inflicted on members' economies by a disastrous price crash in 1998 and the early part of this year. That may take some time, to judge from average prices. Brent, the pricing benchmark judging for much of the international trade in crude, has averaged $15.50 a barrel in the year to date, clearly superior to the paltry $13.34 seen in 1998, but the average still looks sickly in comparison with the 1997 average of $19.32 or the robust $20.30 (correct) seen in 1996. The market also drew strength from expectations of a decline in U.S. crude inventories from American Petroleum Institute (API) weekly data on crude and products stocks. In its report the previous week, API said crude stocks had fallen by almost six million barrels in the week ended Sept. 3, which had boosted market sentiment and propelled prices to new highs. The market expects that continued output cuts by OPEC, coupled with Northern hemisphere winter demand, would soon eliminate the supply glut which pushed NYMEX crude to 12-year lows of $10.35 per barrel in December 1998. The oil ministers of Saudi Arabia, Iran and Algeria said in talks on Sept. 13 that oil production cuts should be kept in place until they expire in March 2000. Saudi Oil Minister Ali al-Naimi was quoted as saying the three ministers agreed in talks on "the importance of continuing these cuts and complying with them completely until the end of March 2000 since world stockpiles are still high and have not returned to their normal levels." The cuts were put in place in March this year, and are to last 12 months.