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Crude oil hits 10-year high
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August 15, 2000: 7:37 p.m. ET
Brent futures reach record, then slip; U.S. stockpiles, tough Venezuela talk a spur
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NEW YORK (CNNfn) - Brent crude oil futures closed lower Tuesday, doing an about face from a day that saw prices jump to a 10-year high in London, extending recent gains amid concerns about low U.S. inventories and production stockpiles.
The price of Brent futures for September delivery on the New York Mercantile Exchange closed just 27 cents lower to $31.67 a barrel after hitting an early high of $32.70 as North Sea Brent futures in London jumped to their highest level since the Gulf War.
The latest driver for the gains has been tough talk by Venezuela, a member of the Organization of Petroleum Exporting Countries, about the need for members of the alliance to earn enough money from oil at current prices to develop their economies. Saudi Arabia, the leading OPEC producer, is said to be at loggerheads with Venezuela about production plans.
In comments during a visit to Algiers on Tuesday, Venezuelan President Hugo Chavez said the current rise in oil prices was due to Saudi Arabia's respect of its OPEC output quota and what he described as internal energy problems in the United States.
But he said he has not changed his opinion that OPEC should continue to abide by a mechanism under which the cartel would release 500,000 barrels per day if prices exceeded the group's target of $28 a barrel for 20 consecutive working days.
Meanwhile, analysts said the leading cause of the price spike was a report last week that showed, by some measures, 24-year lows in U.S. crude oil stocks. Other factors also included lower output by Iraq since early June, rumors that Saudi Arabia may not keep promises of greater output, and near-capacity output by OPEC countries that aren't located in the Middle East.
One analyst also said Wednesday's expiration of the September Brent futures contract, to be replaced by the October contract, was adding an extra dose of volatility to a market that's already faced big price pressures.
"What we're partly faced with is a temporary aberration," said Peter Gignoux, an oil industry analyst at Salomon Smith Barney in London. "But even if we fast-forward to tomorrow [after the contract change] we're still at $30 a barrel - which is about 10 percent above the year's average."
The Brent futures contract for October delivery traded early Tuesday afternoon at $30.07 per barrel - a difference of $2.48 from the September contract level.
"The market simply thinks that there's not enough oil on the market and is theorizing that were going to see continued high levels of consumption," Gignoux said.
The surge for oil prices comes ahead of the American Petroleum Institute's weekly release of numbers on U.S. crude and refined oil inventories after the close of trading in New York on Tuesday. Recent API reports have pointed to heavy draws on the U.S. stockpile, analysts said.
 "And then there's something going on with the trading patterns," said one analyst who spoke on condition on anonymity. "There are a small number of players in an active market. It looks like a squeeze," he said, citing technical moves by investors who got caught betting prices would fall.
Saudi Arabia, facing concerns from U.S. officials that higher oil prices could dampen the scorching U.S. economy, agreed last month to boost its output. Those supplies, which usually take about 45 days to be delivered from Saudi Arabia's oil fields, haven't arrived yet, leaving a cloud of uncertainty over the market.
One analyst said speculation has cropped up in recent weeks that Saudi Arabia may not hold to those promises of higher production, which helps to drive down oil prices, after September. 
-- from staff and wire reports
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