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News > International
Oil prices soar
September 11, 2000: 4:55 p.m. ET

Crude oil futures jump despite OPEC decision to boost production
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NEW YORK (CNNfn) - Crude oil prices soared in late afternoon trading Monday, shrugging off the decision by Organization of Petroleum Exporting Countries to lift output by 800,000 barrels per day but backing off session highs as Saudi Oil Minister Ali al-Naimi said the cartel wanted prices at $25 a barrel.

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graphic CNN's Chris Burns reports from Vienna on OPEC\'s agreement.
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U.S. light sweet crude for October delivery rose $1.51 to $35.14 per barrel on the New York Mercantile Exchange after climbing as high as $35.85 earlier in the day. London's benchmark Brent for October delivery gained $1.50 to $33.65 per barrel on the International Petroleum Exchange.

Crude prices hit 10-year highs last week, with Brent rising as high as $34.60, sparking international pressure on OPEC to pump more oil.

"We are not happy," Naimi told reporters after the OPEC meeting in Vienna. graphic"We said before we intend to bring the price down, and we will bring it down. We are positive it will go down. We want the price at $25 for the OPEC basket."

Analysts said the rise was technical in nature rather than driven by fundamental factors, as traders bought back short positions taken out in the lead-up to the OPEC meeting.

But they also said low stocks of heating oil in the U.S. ahead of the winter were giving the market a bout of jitters. The OPEC deal drew only lukewarm praise from Western consuming governments faced with angry motorists and oil dealers warned that cold winter weather and depleted oil storage tanks in the United States might conspire to keep prices near to current levels.

OPEC confirmed it agreed to raise production by 800,000 barrels per day (bpd), slightly above the pre-meeting expectations of 700,000 bpd, in an effort to stem the recent supply crunch. A formal announcement by the 11-member group came from the group's headquarters in Vienna, where ministers and officials completed their semi-annual meeting.

OPEC's pact will be reviewed at an extraordinary meeting Nov. 12. It is the third time since April that OPEC has released more oil to the market in an attempt to dampen sky-high prices.

graphicNo decision was made at the meeting regarding a successor to Rilwanu Lukman, OPEC's secretary general. A formal announcement about the next leader of the cartel is expected in November.

Soaring prices for refined petroleum products had prompted calls from consumer advocate groups -- particularly in Europe - for their governments to act to alleviate the squeeze on businesses that depend on fuel.

Lukman spoke with CNN in Vienna and defended the cartel's position, insisting the high price of crude would not result in a global economic downturn:

"We don't see a recession in the offing due to oil prices. Oil prices are not going to cause recession in the global economy." He pointed out that industrialized economies "are less dependent on oil than they were before."

Many industry experts already were predicting Monday that OPEC's action is little, too late - particularly with the approach of winter and the anticipated seasonal increase in demand for oil, particularly in the colder climes of North America.

European unrest


"We could see prices come down by $2, maybe $1 more, but then it is likely to begin creeping up again," said Axel Busch, a senior correspondent with the Energy Intelligence Group, which publishes newsletters and reports on the global oil market. "With or without a production increase, stocks are down at least 50 percent from last year's levels."

graphicOPEC said it will raise its output 3.1 percent to 26.2 million barrels a day for 10 of its 11 members; the tally excludes output from sanctions-bound Iraq. The agreement will continue until Nov. 12, when OPEC members will meet again to assess market conditions. The cartel normally meets only twice a year, in March and September.

The new deal may not be enough to temper growing frustration in Europe, where the price of gasoline has skyrocketed to as much as 80 pence a liter, or roughly $4.50 a U.S. gallon. Truckers, farmers, taxi drivers and fishermen in the United Kingdom, France and Italy have been railing against their governments to protest the high taxes they levy on gasoline, compounding the oil-price pinch.

The recent price crunch stems from a decision by OPEC members in 1999 to curb oil output to reverse the preceding years' decline in prices. Approximately a year ago a barrel of oil traded at about $19, while in June 1999 it sold for as little as $12.

Crude oil prices have settled above $28 per barrel every trading day since Aug. 3. Last Thursday, the average OPEC price was $33.84 per barrel.

"Greedy" OPEC to blame?


Busch said OPEC members probably should have begun boosting production much sooner than they did to avoid the kind of price spike that has happened in recent weeks.

"They got greedy," said Busch. "They kept the curb in production up for too long. If they had started to lift production last September, then we likely wouldn't have this problem right now."

Even so, the International Energy Agency Monday said OPEC already overproduced as much as 400,000 barrels per day in August. According to the Paris-based watchdog, OPEC's monthly production averaged 25.84 million barrels, compared with the 25.40 million barrels expected.

"If OPEC were to increase its production by 500,000 barrels per day, it would, to a large extent, be formalizing existing levels of overproduction," the report said. "Whatever the outcome, producers will likely take it upon themselves to increase production in excess of formal targets," it said.

Including Iraq, the IEA estimated that OPEC output surged to 665,000 barrels per day in August. Back to top

-- from staff and wire reports

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.