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Oil rally suffers a setback
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April 1, 1999: 10:17 a.m. ET
Brent crude skids 58 cents in London as traders cash in on recent run-up
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LONDON (CNNfn) - A six-week recovery in world oil prices sputtered Thursday as benchmark Brent skidded 59 cents on profit taking triggered by Wednesday's run-up to above $15 a barrel.
International Brent crude for May delivery was trading sharply down at $14.65, well below Wednesday's 10-month closing high of $15.24, and off the intraday high of $14.74.
The setback came just 10 days after members of the Organization of Petroleum Exporting Countries, the world oil cartel, agreed on stringent new export controls aimed at raising oil prices from their lowest levels in more than two decades.
The landmark pact involving OPEC and non-OPEC members Oman, Norway, Russia and Mexico, calls for the removal of 2.1 million barrels of oil from daily production to pare glutted worldwide stockpiles.
OPEC has pledged to cut 1.7 million barrels a day. The pact took effect Thursday and is due to remain in force for one year.
The cartel is eager to avoid a reprise of the historic sub-$10 a barrel lows that sliced into their profits. OPEC has seen an estimated $50 billion in profits wiped out by the 14-month oil glut.
That goal got a welcome boost Thursday from Iran's announcement that it is cutting oil supplies to its European and Asian clients by 15 percent in April. Iran has pledged to cut nearly 570,000 barrels a day out of 3.9 million under the new export regime, Reuters reported.
Analysts say it will be some time before the cutbacks produce a tangible recovery in prices. They contend prices aren't likely to rise significantly until late summer or fall, the earliest time at which bloated supplies will be drawn down enough to have an impact on prices.
Others warn that a lack of discipline could foil the latest deal.
Last year, two previous reduction efforts foundered on compliance problems.
Oil shares were mixed in afternoon European trading Thursday. In Paris, Total (PFP) lost 1.84 percent to 112 euros, while Elf Aquitaine (PAQ) gave up 1.51 percent to 123.9 euros.
U.K.-based Shell (SHEL) bounced into the black, trading up ¼ pence, or 0.06 percent at 417-1/2 pence. BP Amoco (BPA) retreated 18-1/2 pence to 1,030, a 1.76 percent pullback after unveiling plans to acquire Atlantic Richfield in a $26.8 billion all-stock deal. The combination will create the world's second-largest corporate oil company, behind Exxon-Mobil.
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