March 22, 2004
SINGAPORE, (Reuters) - Oil prices slid more than one percent on Monday on hints that OPEC may delay to June a cut to world supplies, scheduled for April 1, to cool red-hot oil markets that touched a 13-year high last week.
U.S. light crude for April delivery tumbled 53 cents to $37.55 a barrel. London's Brent crude also fell, losing 53 cents to $32.73 a barrel.
Prices have risen steeply since OPEC agreed last month to cut official production quotas by one million barrels per day (bpd) from April 1 to stop supplies building in the second quarter when demand seasonally drops.
A senior OPEC delegate told Reuters on Monday the producers' cartel may consider delaying a reduction of one million barrels of daily production until June. OPEC ministers will meet on March 31 in Vienna to review policy.
"The idea is there, but there is no formal proposal as such," the delegate said.
Oil prices last week hit the highest closing price in 13 years on rising Chinese demand, low U.S. fuel inventories and fears of attacks that could disrupt oil supplies.
Ali al-Naimi, oil minister for OPEC's leading producer Saudi Arabia, at the weekend blamed high prices on speculators and low U.S. gasoline stocks.
Naimi said it was not clear if OPEC would delay the cut. "I don't know. At the moment no one is in a position to say," Naimi told Italy's Il Sole 24 Ore in an interview.
Algerian Oil Minister Chakib Khelil said on Sunday world oil markets were not short of supply and OPEC remained concerned about a seasonal drop in demand in the second quarter.
"The prices are too high, but not for lack of supply. They're higher, we think, because of geopolitical uncertainties," Khelil told reporters on the sidelines of an energy conference in Doha.
"We're still concerned about a decrease in demand in Q2."
In a research note, SG Securities said OPEC risked losing credibility if it did not go through with the April reduction.
"Failing to confirm April's cut -- and to implement it -- would show OPEC as unwilling to control the oil market or even incapable of doing so," SG said.
"Hedge funds would punish an OPEC perceived as weak-willed by quickly liquidating, or even reversing their long positions, with the resulting wave of selling triggering a price collapse."
Data from the U.S. Commodity Futures Trading Commission (CFTC) showed on Friday noncommercial petroleum speculators trimming net long positions, which had been running at four-and-a-half year highs on a bet that prices would rise.
Analysts have estimated that speculative interest in the oil markets had added as much as $8 to the price of crude.
SECURITY FEARS
The price slide came despite new security fears after the Israeli army confirmed it killed Hamas leader Sheikh Ahmed Yassin in a pre-dawn air strike in Gaza City.
Palestinian Prime Minister Ahmed Qurie said the assassination "opens the door wide to chaos" and the Al-Aqsa Martyrs Brigades, a militant group in Palestinian President Yasser Arafat's Fatah, declared "war on sons of Zion", vowing a response "within hours".
Oil markets fear retaliatory attacks and disruptions to supplies from the Middle East, which holds two-thirds of world oil reserves.
The markets are already nervous about potential supply disruptions due to low levels of commercial oil stocks in major consuming nations such as the United States.
Tensions are also high in the fifth-biggest oil exporter, Venezuela, where thousands of opponents of Chavez marched at the weekend demanding a referendum on his rule. An opposition-led national strike last year almost halted Venezuelan oil sales.
Copyright 2004, Reuters News Service
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