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Tuesday, September 21, 2021
CARACAS, Jan 18 1999 (IPS) - Oil Prices rose slightly during the second week of the year in a market hypersensitive to any annoucement of real or psychological impact on the chances of limiting the surplus.
Brent North Sea rose to 11.49 dollars per barrel, from 10.83 dollars the previous week, while US West Texas Intermediate (WTI) went from 12.61 dollars from 12.50 and the Organisation of Petroleum Exporting Countries (OPEP) upped to 11.06 from 10.58.
The weekly report on the movement of real transactions of crude, issued by Venezuela’s Energy Ministry, picked up in January compared with December levels, when it had sunk to the lowest point in real terms for the last 50 years.
But the report also showed levels prices are moving at so far this year more than 1.5 dollars down on 1998 figures – which were already between 32 and 38 percent down on 1997.
The International Energy Agency (IEA) issued its monthly forecast at the weekend, noting a fall in world oil demand for the fourteenth consecutive month, now quoting the yearly total at 75 million barrels per day (BPD).
IEA warned demand will be 720,000 BPD lower than predicted for 1999, but with the positive ingredient of maintained growth of 1.1 million BPD – higher than the 1998 rate of only 400,000.
The other important news was the Iraqi rejection of a US proposal to eliminate restrictions on oil sales, demanding a total lifting of the embargo they have suffered since 1991.
Washington’s offer caused crude futures prices to totter during trading Thusday, due to the impression that this would somehow maintain the surplus, even though Iraq is not in a position to produce more oil.
Hence both Washington’s gesture and Baghdad’s rejection are really hollow token actions as far as the oil market is concerned. Iraq is even unable to produce enough to obtain the 5.2 billion dollars each half-year allowed under the current oil for food agreement with the United Nations.
But futures traders took the possible freeing of Iraqi production as another sign that the already flooded world oil market will have no supply problems in the medium term.
The IEA, made up of the leading oil consumers, indicated the northern winter will be gentler that was forecast and that drainage of the enormous stockpiles accumulated in the hands of consuers will occur slower than was expected.
Most of the 1999 additional demand will come from consumers in the industrial North, who increased consumption by some 670,000 BPD.
As for production, the IEA is awaiting increases from several Latin American countries, of which only Venezuela – the world’s third biggest exporter – belongs to OPEC, while on the contrary it is expecting a reduction in internal extraction in the United States, as prices are becoming unprofitable.
Venezuela’s energy minister, Erwin Arrieta, said Friday the so- called real barrels – those traded between buyers and sellers and not on the stock exchanges – “are climbing, slowly, but climbing nonetheless.”
He warned this positive tendency is due to factors beyond the natural forces of supply and demand as overproduction continues, meaning the situation could change at any moment.
The minister Tuesday caused the reduction of sales prices for February, when he confirmed Kuwait’s proposal for OPEC to bring forward an extraordinary conference a month from March, with a view to encouraging prices.
This announcement ruled out the prompt implementation of any measure in favour of cutbacks different to those decided by OPEC in 1998 unless this can help avoid the slump in prices. The OPEC cuts added up to a total of 2.6 million BPD, and the target was 83 percent fulfilled in December, pleasing analysts.
OPEC contributes some 27 million BPD to a market consuming 75 million, but its 11 members – saving Iraq – are expected to come up with production control measures to curb the surplus offer, something increasingly resisted by some countries within the organisation.
Arrieta insisted on his argument that the futures market – where Brent and WTI prices are set – has an increasingly perverse effect on real trade, as the operators push rates up and down for speculative reasons.
He also reiterated the stance he has stuck to throughout five years in the economy ministry, stating a solution will be found for the crisis not by cutting back production quotas, but by expanding demand, through action agreed with producers.
The minister recalled that 50 percent of the world population has no access to energy from hydrocarbons, whereby the battle must aim “for all the producers to fit and for prices to be balanced both for producers and consumers.”
Venezuela’s export cocktail was selling last week at 9.42 dollars, compared with 8.96 dollars the previous week. And the yearly budget – more than 40 percent oil income – will be adjusted to a nine dollar barrel price.
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