FAR EAST TRADERS EXPECT 20 DLR OIL IN JANUARY
OPEC's agreement to limit output to 16.6
mln barrels per day (bpd) for the rest of the year should boost
spot prices and enable the group to raise its official
reference price to 20 dlrs a barrel in January from the current
18 dlrs, Far East oil industry sources said.
    "Fundamentally, the market situation is bullish and the
official price will be 20 dlrs in January," a Japanese refiner
said.
    The sources said that in spite of over-production by OPEC
members such as Iraq, the United Arab Emirates, Kuwait and
Qatar, demand should exceed supply by the fourth quarter.
    Spot oil prices surged on Friday in late U.S. Trading as
the market anticipated an OPEC agreement on second-half 1987
output. In early Tokyo trade, levels were firm at 17.30 dlrs
for Mideast Dubai cargoes loading next month and 19.00 dlrs for
U.K. Brent, traders said.
    They said they expect more foreign crudes to be sucked into
the U.S. Market as the benchmark crude West Texas Intermediate
(WTI) trades at around 20.30 dlrs.
    "With WTI at 20, 21 or 22 dlrs, U.S. Refiners will import
Mideast and Far East crudes and this will strengthen those
grades further," said a Japanese oil trader.
    Some Tokyo traders were cautious about whether thU spot
market has further upward potential in the short term, having
risen strongly on the OPEC news on Friday.
    "You could certainly argue that if New York rose on that
basis, there's no reason for prices to go up again today," said
one international oil trader in Tokyo.
    "But I think if there's any sign of a dip, it will be bought
back up again pretty quickly," he added.
    One oil industry analyst concurred, "There is no reason to
expect a weak market from now on." He said he expected OPEC to
raise prices to 20 dlrs when it meets on December 9.
    Oil sources said spot prices are unlikely to surge strongly
in the next few months due to cheating by some OPEC members and
the likelihood that Saudi Arabia will act as swing producer to
maintain steady prices.
    Iraq is currently producing around two mln barrels per day
compared to its second-half quota of 1.54 mln, they said. Its
export capability will rise to 2.5 mln bpd when a new pipeline
through Turkey, comes onstream in or around September.
    Qatar is said to be achieving sales of around 350,000 bpd,
against its OPEC-assigned quota of 299,000, by discounting up
to 20 cents a barrel from official prices, the sources said.
    Iran, the United Arab Emirates and Kuwait are also cheating
on the OPEC agreement with over-production and effective price
discounts through counter-purchases, industry sources said. But
they mostly agreed that Saudi Arabia will unofficially act as
swing producer, cutting production to compensate for higher
output by other members or boosting output if spot prices rise
too high too fast.
    Saudi Arabia has a floating oil stockpile of 40 to 50 mln
barrels. "Saudi Arabia wants oil price stability so the
stockpile may be utilized to cool down the market if it rises
too much," an oil industry analyst said.
 REUTER
