INTERNATIONAL SPOT OIL PRICES FIRM ON OPEC ACCORD
OPEC's weekend decision to cut planned
oil output levels for second half 1987 has renewed market
confidence in the oil price outlook for the rest of the year
and boosted international spot prices, oil traders said.
    Spot crude prices are now standing 80-85 cents a barrel
higher than at the start of the OPEC meeting last Thursday and
could continue their rise in the next few weeks, they said.
    The new optimism springs from the agreement reached by OPEC
ministers in Vienna on Saturday to fix a July-December output
ceiling of 16.6 mln barrels per day (bpd).
    At its previous meeting in December, OPEC set a provisional
16.6 mln bpd output limit for the third quarter but proposed a
sharp rise to 18.3 mln in the fourth. The ceilings were to back
up its newly restored fixed prices of around 18 dlrs a barrel.
    When signs first emerged last Friday that OPEC was
contemplating cutting the planned fourth quarter ceiling, spot
prices of the most widely traded crude oil, Britain's Brent
Blend, surged 30-40 cents a barrel.
    Traders said the trend continued in a cautious rally this
morning in London, taking quoted levels up to around 19.25/35
dlrs, compared with 18.45/50 dlrs in the middle of last week.
    Most traders on international oil markets reacted bullishly
to news of the final agreement. They forecast tight supplies
later in the year, when demand for oil increases with the onset
of the Northern Hemisphere winter, and further rises in spot
prices.
    "There will be a scramble for oil in the third and fourth
quarters of this year" one trader said. "In the past three months
we have already seen a rise in demand, particularly from the
U.S., And I expect to see even higher prices" he added.
    Mehdi Varzi, analyst with stockbroker Kleinwort Grieveson
in London, agreed.
    Varzi told Reuters that OPEC was if anything too cautious
in setting the new output ceilings. "There is now a great chance
that Brent crude oil will hit 20 dlrs a barrel in the next
month," he said.
    Laurie Law, analyst at E.F. Hutton and Co Inc in New York,
said over the weekend that she saw the spot price of West Texas
Intermediate (WTI) rallying to around 22 dlrs by the end of the
year from just over 20 dlrs now.
    WTI, the U.S. Benchmark crude, usually fetches a premium of
80 cents to one dlr over Brent. So far this year, spot Brent
has held mostly between 18 and 19 dlrs a barrel.
    But some traders, fearing continued over-production by some
OPEC members, sounded a note of caution over the new accord.
    Iraq has again refused to be a party to the agreement
because other OPEC ministers turned down its repeated demand
for the same production quota as its Gulf War enemy Iraq.
    In recent months Iraq has been producing 500,000 bpd above
its assigned quota, and it could begin pumping a further
500,000 bpd when a new export pipeline comes on stream in
September.
    According to Kuwaiti oil minister Sheikh Ali al-Khalifa
al-Sabah, actual OPEC production in the fourth quarter could be
well above the official ceiling at nearly 18 mln bpd.
 REUTER
