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Oil price at 19-month high
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July 6, 1999: 6:39 p.m. ET
Gain to nearly $20 a barrel is linked to OPEC supply cut compliance
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NEW YORK (CNNfn) - The price of oil hit a 19-month high Tuesday, propelled by evidence that the world's largest petroleum-producing countries are adhering to supply cuts, analysts said.
The price of crude oil futures rose 9 cents to $19.78 a barrel Tuesday. This came after the front-month contract missed the psychologically significant $20 level by 1 cent in intraday trade.
For oil futures, it was the fifth consecutive positive close at the New York Mercantile Exchange. Tuesday's gains also broke a 19-month record, beating the $19.73 a barrel close of Nov. 25, 1997 by 5 cents.
The gains, which helped pull many oil stocks higher, came on increasing evidence that the Organization of Petroleum Exporting Countries, which supplies more than 40 percent of the world's oil, is cutting oil production as promised three month ago, analysts said.
"The basic element here is the continued good level of compliance by OPEC," said Gene Nowak, managing director and head of ABN AMRO's energy group. "Since March, the numbers have come out as impressive in terms of restrained output."
In late March, OPEC oil producers agreed upon stringent new export limits, removing just over 1.7 million barrels a day from a saturated world market.
While the announcement met initial skepticism, Nowak said early data now shows about an 85 percent compliance rate.
Others agree.
"The word is out that OPEC is complying" said Jack Aydin, a managing director and energy analyst at McDonald Investments.
Aydin said the Petroleum International Energy Agency in Paris, the trade publication Petroleum Intelligence Weekly and the Mideast Economic Survey have all recently shown evidence of OPEC compliance.
Both analysts also said that to a lesser extent the rise in oil prices is linked to increased demand from Asia, as those countries emerge from recession.
Looking ahead, Aydin sees oil prices staying in the $17 to $21 range "as long as OPEC behaves."
Similarly, ABR AMRO's Nowak on Tuesday sharply raised his targets for this year's average price of oil to $17.25 a barrel from $15.75 and to $18.25 a barrel from $15.75 in 2000.
Not surprisingly, oil stocks rose Tuesday. Texaco (TEX) gained 2-3/16, or 3.4 percent, to 65-3/16. Chevron (CHV) climbed 2-1/6, or 2.14 percent, to 98-5/16. Oil driller Halliburton (HAL) rose 3 /4, or 1.7 percent, to 45-1 /4.
In other oil price news, Brent crude futures, after soaring to an 18-month high Monday, fell 7 cents to $18.28 in London Tuesday.
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