OIL prices rallied yesterday, ending a long retreat after it seemed
Opec was making progress towards an accord to cut production and mop up
a world glut.
The president of the Organisation of the Petroleum Exporting
Countries, Venezuela's Alirio Parra, said the goal of a Saudi
Arabian-backed plan was to cut 1,500,000 barrels per day from recent
Opec volume of around 25 million bpd.
Sceptical traders doubted if Opec could achieve that much, given a
poor record of quota discipline. But they thought it might remove enough
excess oil to put a floor under prices and perhaps edge them a dollar or
so higher.
''The market is still sceptical about Opec,'' said Geoff Pyne, an
energy economist with UBS Phillips & Drew. ''But I think prices are off
the bottom and we could see some recovery . . .''
London March futures for the benchmark Brent Blend of crude gained
some 60 cents to trade for a while around $17.90 per barrel. New York
light crude futures were soon higher by a similar margin, close to
$19.50. By late afternoon in Europe they had retreated slightly to
around $17.83 and $19.39.
Prices are rallying after a drop of more than 15% since October
because of Opec's failure to curb supply in line with flat demand in an
enfeebled global economy.
Venezuela's Parra is on a tour of key producers to try to broker an
accord to be signed when Opec meets in Vienna on February 13.
In Paris last week he met Saudi minister Hisham Nazer who was later
quoted as saying that Saudi Arabia, the biggest exporter, wanted a cut
in production.
The emerging consensus seems to be to try to cut one million barrels
of daily supply from the present notional Opec ceiling of 24,600,000 --
or 1,500,000 from actual volume now.
But, on the basis of Nazer's quoted remarks, Saudi Arabia still wants
all members to make proportional cuts and would itself only drop to
about eight million from 8,400,000 now.
Crude buyers and analysts said poorer, cash-pinched Third World
sellers like Nigeria might sign such an accord but, on their recent
record, would be unlikely to implement it.
''A credible agreement should at least reflect the reality facing the
smaller producers,'' said Mehdi Varzi, who follows Opec for Kleinwort
Benson Securities in London.
Varzi thought the net effect of the emerging accord would be daily
Opec production around 24 million barrels.
A potential plus for Parra was that Kuwait hinted it might curb output
after earlier wanting to remain excused from Opec rules while it
rebuilds after the 1991 Gulf war.
Reporters asked the Kuwaiti minister, Ali al-Baghli, after he met
Parra whether a Kuwaiti cut had been discussed. He replied: ''Yes,
regrettably, as a possibility . . . this is a bitter medicine . . . but
we cannot break the consensus.''
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