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Oil may top $14 next week
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March 16, 1999: 11:39 a.m. ET
Price could rise after March 23 with output-cut pact; $16 will take longer
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LONDON (CNNfn) - Oil prices could breach the $14 a barrel level next week when oil producers are set to sign up to the 2.6 percent cut in world oil output agreed to last Friday. But experts warn that any further price rise is some months off.
The price of benchmark Brent crude rose above the $13 per barrel level for the first time this year last Friday after ministers from the Organization of Petroleum Exporting Countries members Saudi Arabia, Venezuela, Algeria and Iran and non-OPEC member Mexico agreed to a daily cut in output of 2 million barrels.
Since then the price has slipped back, with June futures for Brent crude currently trading around the $12.17 mark. But Joseph Stanislaw, president of Cambridge Energy Research Associates, believes a clear indication from the oil producers as to how each will shoulder its responsibility for slashing output could significantly boost the price.
OPEC members are meeting March 23 to discuss the cuts and at the same time other major producers, including Mexico and Norway, are due to lay out their proposed production cuts.
"If they come up with strong announcements about the agreed cuts it could easily see $1 to $1.50 added to the price [of a barrel of oil]," Stanislaw said.
After that, however, Stanislaw expects the market to tread water as it waits to see how well the cuts are implemented. "The price will hold . . . for the next two months with the market waiting to make sure that OPEC actually makes the cuts it has announced."
Stanislaw believes that a $15 to $16 dollar oil price by the end of the year is within reach even if the full cut isn't implemented. "The figure depends on how the cuts are delivered. No one is really expecting the full 2 million barrels per day to be delivered, but somewhere around three-quarters of those cuts is what the market is looking for."
After that the big test will be how long producers can hold back from raising output to take advantage of the higher prices. "History says when the price goes up people start producing more," he said. Stanislaw believes the key period will be between September and December, when the real price rises should start to take hold. 
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