Charlotte Denny Tuesday February 20, 2001 The Guardian Opec leaders warned yesterday that the oil exporters' cartel was poised to agree more supply cuts at its next meeting, adding to the turmoil in a market already alarmed by the weekend air strikes on Iraq. The cartel's secretary general, Ali Rodriguez said the supply restrictions could be up to a million barrels a day "in the worst case scenario". North sea oil prices surged above $27(#18) a barrel, closing up 42 cents at $27.32 a barrel, as the markets digested Mr Rodriguez's comments and the impact of the US and British strikes. "Basically we're up on the back of the Iraqi bombings," said one London trader at the International Petroleum Exchange (IPE). "At the moment there is not really that much to worry about, but obviously if it escalates out there we'll have to relook at that." The market's big worry is that the raid could provoke a regional oil embargo but there seems little danger so far of a coordinated response from the Arab states. "While we would argue that the actual impact on oil supplies will be minimal, the news is certainly going to have unsettled the markets," said Lawrence Eagles, commodities expert with the GNI brokerage. But hawks within the oil producers' cartel may find it easier to make the case for deep cuts at their next meeting on March 16th. Opec, which controls 40% of the 77m barrels of oil used each day, has a target price bank of $22-28 per barrel for a basket of its crudes. Its reference price stood at $24.90 on Friday according to the Opec secretariat, but the cartel fears slowing demand as the northern hemisphere winter ends could push prices lower. Asked whether Opec had already decided to announce a further reduction in output next month, Mr Rodriguez replied: "Not yet, but in any case there is an inclination, almost a conviction, that we have to cut production because normally in the second quarter there is a sharp drop in demand and, of course, prices." Mr Rodriguez said global oil demand normally falls by 2m barrels per day from March to June, although Opec's supply cut of 1.5m barrels per day in February meant the next cut would be smaller. On the foreign exchange markets, the euro was in the ascendent yesterday, rising as far as 92.35 cents at one point, nearly 1% up on the day. Forecasts from the International Monetary Fund over the weekend confirming that Eurozone growth should outstrip the US this year sharpened the market's appetite for the single currency. "People are getting unnerved about the US economy and are still very concerned about the outlook in Japan," said David Bloom, currency strategist at HSBC Markets in London. "Given the ECB seems fairly confident about growth, the euro is benefiting and should continue to go up." The euro's rally is expected to continue on the back of growing confidence in the strength of the eurozone economies. Such expectations were reinforced after the G7 said on Saturday that growth prospects in the single currency region were favourable due to strong domestic demand, a point repeated yesterday by the head of the Bank of France, Jean-Claude Trichet. _______________________________________________ CrashList website: http://website.lineone.net/~resource_base
