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Oil soars on output cut
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March 12, 1999: 11:31 a.m. ET
Crude breaches $13 barrier after agreement on 2 million barrel reduction
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LONDON (CNNfn) - Global oil prices pushed past the psychological $13 a barrel level for the first time this year after Friday's agreement in The Hague to cut world output by 6 percent, or by two million barrels per day.
Oil ministers from the Organization of Petroleum Exporting Countries members Saudi Arabia, Venezuela, Algeria and Iran and non-OPEC member Mexico had already agreed to cut 305,000 barrels a day Thursday and the follow-up deal came at the top end of expectations.
The benchmark Brent North Sea contract for June delivery climbed from $12.63 at the start of Friday trading to hit $13.21 before slipping back to $12.98 in afternoon trading in London. West Texas Intermediate gained 54 cents to hit $14.85 on the Nymex.
OPEC countries have still to confirm details of individual production cuts and analysts remain concerned about the level of compliance at a time when its most oil-dependent members -- notably Saudi Arabia, Iraq and Venezuela -- are desperate for cash. The deal is expected to be formalized at an OPEC meeting on March 23 when other members such as Norway are expected to confirm supply reductions.
Saudi Arabia is reportedly not insisting that Venezuela -- which has failed to comply fully with the reduction regime in the past -- make substantial cuts this time around. The Saudis have pledged to cut 500,000 barrels a day.
The producers are under pressure to strike an accord to reverse a 14-month trend of sagging oil prices which has seen crude dip from $20 a barrel in September 1997 to rock-bottom rates of below $10 a barrel.
Though oil has rebounded $2 from those lows since mid-February, prices have remained hostage to a 400 million barrel stockpile exacerbated by weaker demand in emerging markets.
Oil stocks remain muted on the supply cut as many analysts had already factored in an oil price above $15 in 1999 earnings estimates. Shell (SHEL) shares climbed slightly in London before slipping back 5.5 pence to 391.25 pence while BP-Amoco ADRs rose 0.5 percent to $96 1/8 in early trading.
-- from staff and wire reports
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