Thursday, July 06, 2000
Price of crude oil declining
OPEC members try to change Saudis' plans
By Bruce Stanley
The Associated Press
LONDON — Oil prices fell 6 percent Wednesday in New York as traders dismissed OPEC members' attempts to talk Saudi Arabia out of its plan to pump an additional 500,000 barrels of crude a day.
Libya appeared to side with Iran, Iraq and other OPEC members urging Saudi Arabia not to act alone, and the Saudis strived to find consensus on the divisive issue.
However, industry ana lysts predicted that Saudi Arabia, the world's No. 1 oil producer, would push ahead with its plan to boost output if oil prices fail to drop sharply in coming days. The markets seemed to anticipate a production increase.
“I don't think they're backing off,” Leo Drollas, chief economist of the Center for Global Energy Studies in London, said of the Saudis. “I think they'd be willing to put the oil on the market themselves.”
The 10 other OPEC members reacted with anger and disbelief after Saudi Arabia said Monday that it would add about 2 percent to the cartel's official output of 25.4 million barrels a day.
Except for Kuwait and the United Arab Emirates, no other OPEC members have enough surplus capacity to quickly raise their production levels.
In London, the price for August contracts of North Sea Brent crude fell for the second straight day, slipping 36 cents a barrel from Tuesday's close of $29.22 on the International Petroleum Ex change. Brent closed Monday at $31.10, before the Saudis announced their planned increase.
Light, sweet crude futures fell $1.83 a barrel to $30.67 on the New York Mercantile Exchange, which had been closed since Friday for the Independence Day holiday weekend.
In addition, prices of U.S. gasoline contracts dropped 4.7 percent, heating oil contracts lost 4.3 percent and natural gas contracts tumbled 8.2 percent, although such changes generally take a few weeks to affect the retail market.
“It's a good day for the consumer,” said Peter Gignoux, head of the petroleum desk at U.S. investment bank Salomon Smith Barney.
Gasoline prices have climbed to more than $2 a gallon in some parts of the United States.
The Saudis announced their intention to boost production after it became clear that an increase of 708,000 barrels a day agreed upon by OPEC oil ministers last month was not enough to drive down prices.
With the United States and other importers demanding relief, the Saudis want to open their taps further in hopes of trimming the price of the so-called OPEC basket of seven different crudes to a more sustainable $25 a barrel.
“The Saudis are prepared to risk a fair amount to help put the price of crude oil down — risking the stability of prices (and) risking the OPEC consensus,” Gignoux said.
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