Tuesday, June 20, 2000

Boost in petroleum output expected

The Associated Press and Bloomberg News

        LONDON — Under pressure from the United States and other oil importers, OPEC ministers are expected to agree this week to boost petroleum output by at least 500,000 barrels a day, or by 2 percent.

        But analysts warned Monday that such an increase wouldn't lead to cheaper prices at the pump for American motorists any time soon.

        “No matter what OPEC decides, it's going to be a tough gasoline season in the U.S.,” said Peter Gignoux, head of the petroleum desk at Salomon Smith Barney in London.

        Oil ministers from the Organization of Petroleum Exporting Countries meet Wednesday in Vienna, Austria, to decide whether to increase supplies to consumer nations that are paying more than $30 for a barrel of crude. OPEC pumps about 35 percent of the world's oil.

        Prices of the main U.S. crude blend shot above $33 a barrel last week but began easing off ahead of the meeting as traders anticipated an increase in OPEC output.

        While European central bankers have warned high oil prices threaten economic growth, OPEC members say supplies aren't as tight as they appear.

        “OPEC has the fortunate and rare position of being able to increase production just enough so that prices don't drop drastically,” said Aaron Kildow, an analyst at Prudential Securities in New York.

        Some OPEC nations have resisted pressure for more oil from consuming countries such as the U.S., arguing current high prices are a result of speculation in oil markets and new environmental regulations in the U.S., which pushed up gasoline prices. They say OPEC shouldn't increase its quotas until its September meeting.

        A complicating factor is a labor dispute that threatens to shut down oil production as of midnight Friday in Norway, which is the world's second-largest oil producer after Saudi Arabia.


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