Oil prices fell away last week after reduced stocks estimates and cold weather briefly raised their value, but continued strained relations between Washington and Baghdad kept them from returning to free-fall.
In the most recent diplomatic development, United Nations Sec. Gen. Kofi Annan rejected criticism of his handling of the Iraq crisis, after the U.S. government accused him of not being tough enough on Baghdad.
Annan said his task was made more difficult by sharp divides within the U.N. Security Council: the 15-member council is preparing proposals that take a stance somewhere between the hard-line approach of the U.S. and the more sympathetic position of France, Russia, and China.
On Jan. 15, Baghdad rejected a proposal by the U.S. to remove limits on Iraqi oil sales to enable it to buy food and medicine.
The U.S. proposal was apparently a reaction to a French suggestion that the embargo on Iraq be lifted completely, though without the lifting of weapons controls.
The Iraqi News Agency reported that Baghdad rejected the U.S. proposal and would accept nothing less than a complete lifting of sanctions. This was viewed as a political play on the split within the U.N. Security Council.
Last week, American Petroleum Institute figures showing a fall in U.S. crude oil stocks helped push Brent crude prices above $12/bbl briefly, but, by close of trading on Jan. 12, Brent for February delivery stood at $11.83/bbl, while dated Brent was $11.81/bbl (OGJ, Jan. 18, 1999, p. 23).
By close of business in London on Jan. 19, Brent crude for March delivery was trading at $11.08/bbl, while dated-delivery Brent was valued at $11.25.
Some of the loss was blamed on an anticipation of warmer weather in the Northern Hemisphere, but continued diplomatic wrangling over sanctions against Iraq prevented prices from falling to their recent level of less than $10/bbl.
OPEC outputMeanwhile, the latest estimate of Organization of Petroleum Exporting Countries (OPEC) production by Middle East Economic Survey (MEES) showed continued weakening of compliance with a pledge to cut OPEC output (OGJ, June 29, 1998, p. 28).
MEES reported that combined OPEC production rose to 27.61 million b/d in December from 27.56 million b/d in November, taking the organization's compliance with its cutbacks pledge down to 67%.
A lessening of political unrest allowed Nigeria to revive its output by 60,000 b/d, while Venezuela hiked production by 30,000 b/d in December, Kuwait by 30,000 b/d, Indonesia by 20,000 b/d and the U.A.E. and Algeria by 10,000 b/d each see Table 1 [83,386 bytes] .
MEES said Venezuela's increase, following a 200,000 b/d hike in November, was likely to raise eyebrows in OPEC circles, as it indicated a shortfall of 355,000 b/d from the country's pledged production cut of 525,000 b/d. "However," said MEES, "some OPEC circles feel that this probably represents a carry-over from the outgoing administration, both of the government and the state oil company Pdvsa (Petroleos de Venezuela SA), and a return
to the OPEC cutback mode, inspired by President-Elect Hugo Ch vez, is expected to take root from January onwards."
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