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. Last Updated: 07/27/2016

Oil Prices Rally in Response to Curbs




LONDON -- Oil's renewed rally gathered pace Tuesday as bulls brushed off bearish Venezuelan comment that OPEC output curbs would probably not stay for the whole of 2000.


Benchmark Brent crude for March delivery was 25 cents firmer at $25.90 a barrel after touching a session high of $25.95, a mere 20 cents below a nine-year peak struck Dec. 15.


In the United States, light crude West Texas Intermediate posted a fresh nine-year high of $28.40 a barrel in overnight trade.


The gains occurred despite a remark from Venezuelan Energy and Mines Minister Ali Rodriguez that he did not think current supply curbs would be maintained for the whole of 2000, although he added it was always a possibility.


Last week, Saudi Arabian Oil Minister Ali al-Naimi fuelled bullish sentiment when he said that if market conditions remained as they were, he saw no need to change the output policy, possibly even for the whole of 2000.


And OPEC Secretary General Rilwanu Lukman said Thursday a consensus was emerging in the Organization of the Petroleum Exporting Countries to maintain current output levels for the whole of 2000.


An OPEC oil market monitoring meeting attended by Rodriguez last week recommended exporters extend supply curbs beyond their current March expiry date but suggested no new deadline.


OPEC ministers are due to meet in Vienna, Austria, on March 27 to set output policy beyond March, but they have already signalled their desire to hold on to the curbs.


Dealers say investment fund bulls have clearly voted for that possibility by buying forward oil.


But commercial players who have the benefit of seeing physical oil flows appear to be less enthusiastic.


"If OPEC compliance holds, then it takes only a little maths to work out that any extension of the current accord will rob the importing world of the chance to make the much needed stock builds ahead of next winter," said brokers GNI in London.


The supply curbs, put in place in March 1999 to cut OPEC output by 4.32 million barrels per day, were to last a year.


OPEC's adherence to the output cuts has generally exceeded expectations and succeeded in lifting prices from sub-$10 lows in early 1999.