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Brent Oil gains momentum
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March 18, 1999: 10:16 a.m. ET
Suppliers help price gains to stick as market looks to $14 a barrel and beyond
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LONDON (CNNfn) - Oil prices regained fresh momentum Thursday to reach a six-month high as markets grew confident that producers would enforce the supply cuts agreed last week.
The three-month Brent future for May delivery climbed from $13.22 a barrel to reach $13.83 in afternoon trading on London's International Petroleum Exchange. This is the highest level for the most heavily traded benchmark since last October.
Prices briefly breached the $13 barrier after last Friday's deal in The Hague to cut 2 million barrels a day from global production. They fell back to $12.27 earlier this week as the market waited for OPEC and non-OPEC members to honor the deal, due to be ratified at a meeting in Vienna on March 23.
"No-one has held back," said Joseph Stanislaw, president of Cambridge Energy Research. "They have put some definition around the numbers and now we have to wait for the reality."
Russia announced Tuesday that it would honor the cuts but the market waited for the response from the largest producer, Saudi Arabia, which confirmed to Japanese and South Korean customers that April supplies would be cut by around 10 percent. Kuwait Mexico, Oman and Qatar have also announced their intent to meet the agreed cuts from April.
The supply restraint is making inroads into the 500 million barrel global oil inventory. Analysts believe the price can move past $14 and toward $15 within three months if producers manage to sustain a compliance rate of 70 percent for the cuts and resist the temptation to raise production at the higher prices.
"If they can make the deal stick for a year - not three months - that will knock all of the excess supply out of the system and give us a chance to see if demand from the Asian economies will revive," added Stanislaw.
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