Oil prices sagged on Monday, September 17, amid strong hopes that OPEC oil exporters could use their bountiful crude supplies to help the wheezing global economy in the jittery aftermath of last week's terrorist attacks in the United States.
A barrel of Brent North Sea crude for November delivery slipped as low as $28.55 a barrel, having peaked at $29.80 in morning trade. US markets were late to resume trading as Wall Street gingerly picked up the pieces from last Tuesday's carnage.
The oil market has been pulled in both directions ever since terrorists sent hijacked aircraft piling into the hub of US capitalism in New York. Some traders, fearing a US economic slump may emerge from the outrage, are predicting lower demand and hence weaker prices.
But others argue that US retaliation may set oil-importing Western countries on a collision course with the Arab oil-exporting world, threatening another of the prices spikes that endangered the global economy in the mid-1970s and again in 1990.
Against that backdrop, investors were listening closely for noises from the Organization of Petroleum Exporting Countries (OPEC) to see which way the 11-nation cartel of mostly Arab and Middle Eastern oil producers would respond.
In Vienna, OPEC officials denied that it was about to flush more crude through the market and keep a lid on prices. Ministers in the United Arab Emirates and Indonesia said only that OPEC would help stabilize prices if they continued to rise. Last week prices gained two dollars a barrel as a result of the drama.
But in market circles Monday, dealers said rumors of OPEC promises were strong enough to offset earlier fears of an imminent US military campaign in Afghanistan to try to root out prime suspect Usama Bbin Ladin.
"Initially prices went up as Taliban troops amassed on the border," said Robert Laughlin, a trader with the GNI brokerage. "Since then we have come off as rumors have come out that OPEC have suggested that they will accept lower prices for a short period for their oil in order to allow for the Americans and for the financial markets to recover," he said.
Another dealer, Terry Wilson at ABN Amro, added: "We had some people saying that the OPEC ministers had met with the guys in the states over the weekend and said that they would raise oil output by one million barrels per day. "If the price of oil gets too high then OPEC will step in and increase output because they are committed to trying to keep it between $22-$28 a barrel," Wilson added.
Although OPEC reaps greater revenues when oil prices are high, Salomon Smith Barney oil expert Peter Gignoux said a skyrocketing market at this stage could work against the 11-nation cartel. "If we had on oil shock on top of a stock market crash it might impact on the world's economies for some time to come," Gignoux said. "If the world's economies sink into recession because of higher oil prices, then OPEC would have shot themselves in the foot again. "It would be a very good idea for them to be market-flexible," he said, adding that the best way to do this would be to "increase production".
OPEC said no decision on output would be taken until a meeting of energy chiefs in Vienna on September 26. But the cartel will also be concerned at ebbing prospects for global demand. The London-based Center for Global Energy Studies (CGES) said Monday that global oil demand could fall by up to 400,000 barrels per day over the northern hemisphere winter, undermined by last week's mayhem.
"The disruption caused to the US economy and to the country's trading partners, coupled with an expected denting of US consumer confidence, is expected to delay further any recovery in the US economy and could tip the world into global recession," the think tank CGES said in its Monthly Oil Report. ― (AFP, London)
by Marie Wolfrom
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)
