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Oil drops to three-week low
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March 20, 2000: 3:32 p.m. ET
Expectations of higher OPEC output sends crude oil prices down nearly 5%
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NEW YORK (CNNfn) - Crude oil prices slid almost 5 percent to a near three-week low Monday on growing expectations that the Organization of Petroleum Exporting Countries will boost output of the commodity after its representatives meet next week.
Crude oil for April delivery fell as much as $1.46, or 4.7 percent, to $29.45 a barrel on the New York Mercantile Exchange, the lowest since Feb. 24. Prices have dropped in four of the past five trading sessions and are down 14 percent from a nine-year high of $34.37 a barrel reached on March 8. The April contract expires tomorrow. Oil for May delivery declined $1.51 to $27.57.
The declines stem from expectations that the meeting of the Organization of Petroleum Exporting Countries (OPEC), which is slated for March 27 in Vienna, will result in a decision to increase output of reserves -- a move the U.S. government has strongly encouraged in an effort to reverse skyrocketing gasoline prices.
Key OPEC producers have signaled that they will boost output after current production curbs expire at the end of March, but there is no agreement yet on the exact volume of extra oil.
OPEC cut more than 4 million barrels a day out of production over the past year, leading to a drop in crude and oil inventories that globally forced prices to a nine-year high -- the highest since Iraq invaded Kuwait in November 1990. The spike in oil prices led to higher prices for gasoline at the pumps, pushing retail gasoline prices above $2 a gallon in many parts of the country.
As a result, OPEC has come under pressure from the United States, the world's largest oil consumer, to increase supply before rising prices have a negative impact on global economic growth. Rising oil prices can spur faster inflation as companies, which must spend more on such things as transportation and shipping, then pass those costs on to consumers.
Leading producers, including Saudi Arabia, are believed to favor an extra OPEC supply of about 1.5 million barrels a day. Price hawker Iran prefers less than a million barrels daily, while smaller OPEC nations, Libya and Algeria, want to postpone any increase for at least three months.
In addition, OPEC is expected to unofficially turn a blind eye to recent leakage, which has seen output running at about 1.2 million barrels a day above official quotas. It is thought unlikely, though, that the group will readjust last April's quotas upward -- before adding new oil -- to reflect that leakage.
Venezuela Energy and Mines Minister Ali Rodriguez said in Kuwait Monday that producers should be careful not to raise output by an amount too small to have an impact on the market. Venezuela is one of OPEC's larger contributors.
"If the increase is so little, maybe it will not have any effect on the market," he said, on the third leg of his tour of five OPEC countries ahead of the cartel meeting. 
--From staff and wires
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