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N.Y. crude near 3-year high
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November 17, 1999: 4:41 p.m. ET
Nymex prices jump; producers eye more cuts as stocks dwindle, winter nears
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NEW YORK (CNNfn) - Crude oil prices rallied in New York Wednesday, near a three-year high, on new signs OPEC could extend its production cuts just as oil inventories continue to thin and the high-demand U.S. winter season gets under way.
In Nymex trading in New York, light sweet crude oil due for December delivery jumped 90 cents, or 3.5 percent to settle at $26.60 per barrel. That's the highest settle since January 1997.
In London Tuesday, the Brent crude contract due for December delivery settled up 45 cents, to $24.99 a barrel, after hitting a new nine-year high at $25.09 a barrel during the session.
Major oil producers cheered the news that OPEC oil countries would hold to recent production curbs through April, even as the world's inventories begin to shrink from previously high levels. The rally follows strong signals that OPEC and other producers may even extend the cuts beyond a planned withdrawal next March.
Three architects of the latest pact dismissed fears that the oil market is overheating and said in a joint statement Wednesday that speculation, rather than unbalanced market fundamentals, is pushing prices higher.
Investors and pit traders became more bullish after a weekly report late Tuesday from the American Petroleum Institute showed U.S. crude stocks fell again last week and are 9 percent below last year -- now at their lowest level in two years.
As oil prices climb, producers enjoy better profit margins for the cost of extracting oil from the ground.
Petroleum companies were among the leading gainers Wednesday on Wall Street. Industry heavyweight Exxon (XON), climbed 1-7/8 to 81-1/16. No. 2 rival and would-be merger partner Mobil (MOB), gained 2 to 105-5/16. Texaco (TX), the nation's third-largest refiner, rose 1-15/16 to 66-7/8, and No. 4 Chevron (CHV) rallied 3-11/16 to 96-11/16.
Shares of European oil giants rode higher on the improvement in London crude prices. Shell added 1.1 percent, France's TotalFina was 2.7 percent higher, though BP Amoco fell back to trade flat.
One industry observer said OPEC's production cuts have garnered support from key non-members such as Mexico and Norway. Control of the organization has recently begun to change -- with heads of state, rather than oil ministers, overseeing their adherence to those cuts. And that helps guarantee output cuts.
"In my opinion, oil prices are already at unsustainable levels -- and we may be going higher," said Sal Ilacqua, a vice president and oil analyst at Rothschild & Co. "We're going into the peak winter season here … and people realize that OPEC is not going to fall apart."
Ministers said speculators have taken advantage of technical factors to push prices around $3 a barrel higher than supply and demand factors indicated. OPEC President Abdullah al-Attiyah said last week it would be realistic to extend the cuts until the end of next year.
Observance of the reduced production quotas has been maintained at well over 80 percent by OPEC members, leading the London-based center for Global Energy Studies to warn that commercial stockpiles could reach minimum operating levels early next year.
-- from staff and wire reports
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