Oil Prices Rise as OPEC Quota Cuts Begin
Oil prices rose by as much as 56 cents a barrel on world markets Tuesday after OPEC’s two-month production cut took effect and non-OPEC member Norway completed talks with operators in its North Sea fields on possible output curbs.
Egypt, another independent producer, lifted its crude oil prices by 50 cents a barrel for the first half of September in the third round of increases since early August.
Prices also were buoyed by reports that Iran’s navy captured Iraq’s Al Ummaya oil terminal, used as a reconnaissance base, while its land forces killed 700 Iraqi soldiers at the northern Gulf war front. The two OPEC members have been at war since 1980.
On the European spot market, where oil is sold to the highest bidder, Britain’s North Sea Brent crude climbed 35 cents to $14.70 a barrel. The United Arab Emirates’ Dubai Light, a key OPEC crude, rose 35 cents to $13 a barrel.
On the New York Mercantile Exchange, West Texas Intermediate, the benchmark U.S. crude for October delivery, shot up by 56 cents to $15.46 a barrel. The key domestic crude added 35 cents to $16.15 a barrel on the U.S. Gulf Coast spot market.
Home heating oil for immediate delivery on the Merc jumped by 1.17 cents to 45.76 cents a gallon, unleaded gasoline by 0.90 cent to 46.03 cents and leaded gasoline by 0.98 cent to 46.45 cents.
“We’re now at a point where uncertainties are beginning to offset the reasons for oil prices to advance further,” cautioned Alvin Silber, analyst at Brean, Murray, Foster Securities Inc. in New York. “The oil market could begin to tread water, waiting for signs of how these uncertainties will be worked out at the next OPEC meeting Oct. 6.”
Oil prices have risen by about $5 to the $15-a-barrel range since the Organization of Petroleum Exporting Countries agreed Aug. 5 to reduce production by nearly 4 million barrels a day and return to former national output quotas in September and October. Prices averaged $28 a barrel late last year.
Kuwait, which along with Saudi Arabia led an eight-month price war against outside producers, lowered output to its OPEC-assigned quota on Sept. 1, the target date for the production pact, the OPEC News Agency reported. Other OPEC members also reined in their production on Monday to comply with the new accord.
“The big OPEC players like Saudi Arabia, Iran, Venezuela and Indonesia are definitely going to play ball under the two-month agreement,” Silber said. “But OPEC could run into problems when it tries to reach a long-term compromise on new output quotas for its members at the October meeting. Smooth sailing is unlikely from here on.”
Analysts also said oil prices could weaken later this year because consuming nations have built up their inventories unusually early instead of waiting for the fourth quarter, when world demand normally is at its peak.
In Oslo, Oil and Energy Ministry spokesman Egil Helle said the Norwegian government completed talks with six oil companies about possible North Sea production cuts and would now discuss the matter with opposition parties.
OPEC repeatedly has urged outside producers to help the 13-nation cartel shore up oil prices.
Norwegian Oil Minister Arne Oien was expected to discuss Norwegian production curbs with his British counterpart Peter Walker in London on Sept. 10, postponing Norway’s decision on production levels that had been expected Thursday.
Helle said Norway would make an announcement in the second half of September before the Oct. 6 OPEC meeting.
