WSJ: OPEC Pulls Oil Away From $100
Mark Relief Could Be Brief
As Saudi Arabia Pumps Up Output
By LANANH NGUYEN and SPENCER SWARTZ
November 26, 2007
LONDON -- As oil prices continue to flirt with record territory, traders are contending with a potential price damper: increased output from members of the Organization of Petroleum Exporting Countries.
Two reports late last week showed that OPEC is expected to boost oil production -- according to one source of data, by as much as 720,000 barrels a day in the four weeks to Dec. 8 -- as Saudi Arabia steps up deliveries to the U.S.
Swelling OPEC exports could cool oil prices, which touched a record nominal high of $99.29 a barrel last week on the New York Mercantile Exchange. Light, sweet crude for January delivery settled up 89 cents at $98.18 a barrel, a record for a front-month contract.
"Much of this is coming from the Saudis, I believe," said Roy Mason, head of the Oil Movements consulting firm, which predicted the 720,000 barrel-a-day increase. The Saudis are "the only ones that have the real additional capacity within OPEC to do this and the deliveries are headed west."
Another report, by Geneva-based Petrologistics, showed that exports from the OPEC-12 -- excluding newcomer Ecuador -- would reach 31.573 million barrels a day in November, up from 31.249 million barrels a day the previous month, according to a crude-oil trader in London. Exports from Iraq were set to reach 2.605 million barrels a day, up from 2.146 million barrels a day in October. Saudi Arabia -- OPEC's largest producer -- was forecast to export 8.85 million barrels a day in November, versus 8.649 barrels the previous month.
The reported OPEC output increases have "helped drop oil prices from their record levels," according to a note from analysts at TFS Energy Futures, in Stamford, Conn.
Moving to meet rising energy demand and ease concerns about record-high oil prices, OPEC agreed in September to bring an additional 500,000 barrels a day of crude to market. Since then, oil prices have skyrocketed some 30%, moving within striking distance of $100 a barrel and feeding concerns about the potential fallout on global economic growth.
OPEC next meets on Dec. 5 in Abu Dhabi, United Arab Emirates, and ministers have signaled their intention to hold output policy unchanged. But export data suggest the group may be pumping extra oil into the market to feed buoyant global demand. That has the potential to cool prices, traders said.
"OPEC is obviously responding to a market that was beginning to look as if it would find no relief," said a trader in London. "For sure it undermines the building blocks that this rally has been built on, but it won't be enough to take the $100 target out of the picture."
Oil prices in New York have edged ever closer to the $100 threshold but have failed to hit the number, even though many in the oil market think it is just a matter of time.
The march toward $100 comes against a backdrop of strong global demand, perceptions of tight supplies and a hefty speculative premium.
Analysts at Barclays Capital said a test of $100 would likely be ahead of a move up to $101.40-$102 a barrel. That would equal the all-time inflation-adjusted high for oil hit in 1980 in the wake of the Iranian Revolution and the outbreak of the Iran-Iraq war.
--David Elliott and Gregory Meyer contributed to this article.
Write to Spencer Swartz at spencer.swartz@dowjones.com
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