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Oil ends above $20 a barrel
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July 13, 1999: 5:34 p.m. ET
Price of oil hits 20-month high, fueled by Saudi Arabia rumors
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NEW YORK (CNNfn) - The price of oil closed above $20 a barrel for the first time in 20 months Tuesday, propelled by Saudi Arabia's rumored pledge to maintain petroleum production cuts through September, analysts said.
Light sweet crude oil futures for August delivery rose 24 cents to finish at $20.15 on the New York Mercantile Exchange Tuesday.
It was the first close above the psychologically significant $20 mark since Nov. 18, 1997, and the highest finish since Nov. 17, 1997, when crude ended at $20.26.
The climb in oil prices continues a trend that began in March, when the Organization of Petroleum Exporting Countries, which controls 37 percent of the world's oil production, agreed upon stringent new export limits, removing just over 1.7 million barrels a day from a saturated market.
But recently, analysts said Saudi Arabia, which makes up about 25 percent of OPEC production, was rumored to advocate continuing the reduction policy when the oil cartel meets again in September.
"They are the key lynch pin within OPEC," Gene Nowak, managing director and head of ABN AMRO's energy group, said of Saudi Arabia. "They can control the price at any time."
Norman Rosenberg, oil analyst at Standard & Poor's Equity Group, agreed, saying OPEC's most powerful member seems committed to limiting supply.
A long time coming
Tuesday's close above $20 represents a sharp turnaround for depressed oil prices, which have fallen as low as $12 a barrel because of oversupply and depressed demand from financially hurt Asian countries.
The recovery of crude oil to 1997 levels
In the 20-months it took oil to re-reach $20 a barrel, the Dow Jones industrial average climbed 46 percent.
But Tuesday's gains didn't help oil stocks. Shares in the nation's largest petroleum refiners - Exxon (XON), Mobil (MOB), Chevron (CHV) and Texaco (TX) - all fell Tuesday along with the broader market.
Light sweet crude wasn't the only oil contract to rise significantly Tuesday. In London, Brent crude rose 44 cents to end at $19.04, breaching $19 a barrel for the first time since November 1997.
Inventory report ahead
Tuesday's climb comes ahead of the American Petroleum Institute's closely watched report on oil inventories.
Standard & Poor's Rosenberg said Tuesday's rise in oil is partially attributable to a belief among traders that the report will show declining inventories, which is generally good for petroleum prices.
"I don't think anyone wanted to be short going into that number," said Rosenberg, referring to the practice of selling a futures contract.
But looking ahead, Rosenberg questioned how long $20 a barrel could endure
"$18 seems sustainable," the analyst said.
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