Oil prices jump on news OPEC may reexamine quotas Dec. 28
Oil prices jumped on the London and New York markets Friday on hopes that the Organization of Petroleum Exporting Countries' plan to set production quotas at Cairo on Dec. 28 will be a reality and not a mirage emerging from the Egyptian desert.
By the OGJ Online Staff
LONDON, Dec. 14 -- Oil prices jumped on the London and New York markets Friday on hopes that the Organization of Petroleum Exporting Countries' plan to set production quotas at Cairo on Dec. 28 will be a reality and not a mirage emerging from the Egyptian desert.
On the London International Petroleum Exchange (IPE), Brent crude oil for January delivery rose by 70¢/bbl, or 3.9%, to $18.50 as traders covered positions for settlements due after the OPEC meeting.
In early trading on the New York Mercantile Exchange (NYMEX) oil for January delivery rose as much as 81¢, or 4.5%, to $18.93, the biggest one-day gain since Nov. 8.
The market was also reacting to a statement from Norway, which Friday announced that it will agree to cuts in its exports late next week, but again did not say if that cut would be 100,000 or 200,000 b/d. A spokeswoman for the Energy Ministry said that an announcement will definitely be made before the end of the week.
That means that even with a Norwegian output cut at the lower level, non-OPEC producers have now made firm commitments to make more than half the combined cuts of 500,000 b/d demanded by OPEC as a precondition for its reduction of 1.5 million b/d. Angola has joined Russia, Norway, Mexico, and Oman in the reductions.
Russia, the largest oil exporter outside OPEC, Mexico, and Oman have promised combined cuts of 275,000 b/d. Angola has offered to make a 22,500 b/d reduction, an OPEC spokesman said in a statement issued in Vienna.
The Cairo meeting was announced by Venezuelan Energy and Mines Minister Alvaro Silva, who will chair it.
Representatives of most OPEC-member states were scheduled to be in Cairo in late December for a regular gathering of the Organization of Arab Petroleum Exporting Countries. The 10-nation OAPEC includes seven OPEC members.
However, in the longer term OPEC is not assured of continued co-operation from Russia. OAO Lukoil, Russia's biggest oil producer and a reluctant participant in the production cut, said Friday it expects 2001 profits to drop below last year's $3.3 billion because of falling world oil prices. It said it would try to increase its output next year.
Pres. Vagit Alekperov said Lukoil's net income, based on US accounting principles, tripled in 2000 as oil prices rose to a 10-year high, but profits fell 2.1% in the first half of 2001. He said earnings for the year would decline from 2000, but would not provide a specific profit forecast.
Lukoil shares fell 1.8%, to $10.84 in Moscow. The stock had risen 18% so far this year. Lukoil said it plans to increase oil production 2.8% to 1.6 million b/d next year.
The company will invest more than $5 billion over the next 10 years to develop oil fields in northwest Russia, upgrade refineries, and build pipelines, Alekperov said.
"Our goal is to increase annual production in the region from 80 million bbl to 150 million bbl, and to develop retail sales so that we have 25% of the local market."