The price of crude oil soared to well over 32 dollars a barrel in London and New York on Tuesday, as analysts predicted a further fall in US oil stocks and OPEC said that prices should be maintained.
In London, the price of benchmark Brent crude for September delivery reached a session high of 32.80 dollars before slipping back on profit-taking to 32.18 dollars a barrel, 70 cents higher than Monday's close.
Tuesday's Brent prices were the highest since November 1990 when the price rose to 32.45 dollars a barrel following the invasion of Kuwait by Iraq.
On October 10, 1990, Brent had risen to 40.95 dollars a barrel.
In New York, light sweet crude for September delivery was trading on Tuesday at 32.27 dollars a barrel, 33 cents higher.
Earlier this year, New York prices topped 34 dollars a barrel.
Analysts said prices had risen on Tuesday as the market awaited publication of data from the American Petroleum Institute (API) which was expected to show a continuing fall in US stock levels. A week ago stocks had sunk to the lowest levels since 1976.
An analyst at GNI Research, Lawrence Eagles, said that the extent of the price rise was nevertheless "quite surprising".
He said: "We thought that after the rise yesterday, it (the price) would come down."
However, he said: "The market is still very tight on the September contract and there is some short covering ahead of the API numbers tonight."
Another analyst, Mark Keenan at Prudential Bache, said that the exceptional climb in Brent prices early Tuesday to levels higher than Monday's New York close was "linked to the expiry of the September Brent contract tomorrow (Wednesday). It (the price) is a little bit unrealistic."
Eagles said that a further factor was uncertainty over expectations Saudi Arabia, the world's leading oil producer, might reduce, rather than increase its output in September.
In July, Saudi Arabia triggered a marked decline in prices when it said that it would increase production by 500,000 barrels per day unless the market stabilised.
Fellow members of the Organisation of Petroleum Exporting Countries (OPEC) criticised Saudi Arabia for its unilateral stance, but then Venezuelan Oil Minister Ali Rodriguez, who is also OPEC president, announced he had asked his colleagues to prepare for an increase of 500,000 barrels per day if prices remained high.
The output rise was not forthcoming as the price of an OPEC basket of crude oils fell sharply.
On Monday, the basket price had climbed back to 28.53 dollars, OPEC said.
Meanwhile, Venezuelan President Hugo Chavez on Monday completed a tour of OPEC countries -- ahead of an OPEC summit in Caracas at the end of next month -- during which he said price levels were "fair" and should be maintained.
The chief economist at the Centre for Global Energy Studies, Leo Drollas, said that pressure was mounting before the presidential election in the United States, the world's foremost oil consuming nation, where the price of oil has become an election issue.
He added: "Another side of the story is this confusion out of Saudi Arabia, with Venezuelan President Chavez coming through saying that the market is OK."
The Caracas summit will be preceded by an OPEC ministerial conference in Vienna on September 10 that will consider output levels.
So far this year, OPEC has agreed two output increases in an effort to stabilise prices that have more than tripled since December 1998.
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)
