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Thursday, June 10, 1999 Published at 11:38 GMT 12:38 UK

Business: The Economy

Strike pushes up oil price

Oil production has been cut - and prices are rising

Crude oil prices have risen to their highest level for a month after unions in major oil-producing nation announced strike plans.

Venezuelan oil unions agreed an indefinite strike from Monday to protest at a decision to freeze wages.

Venezuela is the third biggest oil exporter in the world and the second biggest, behind Saudi Arabia, in the Organisation of Petroleum Exporting Countries (OPEC). Traders fear a strike could limit supplies.

[ image: Oil workers know they produce a valuable commodity]
Oil workers know they produce a valuable commodity
But state oil company Petroleos de Venezuela (PDVSA) says it will implement a contingency plan to ensure skeleton staff manning key installations during the industrial action.

The price of crude held firm above $16 a barrel, at $16.08 a barrel for July delivery and $16.13 for August delivery.

Earlier in the year prices had fallen below $10 per barrel. To counter this development, OPEC had pledged to cut output by some 1.7m barrels a day in a bid to reduce supply and hence boost flagging prices.

After OPEC countries made the commitment March, prices immediately jumped but have eased since mid-May.

America' stockpiles

The price of Brent crude oil - the benchmark of the market - had earlier been pushed into negative territory on news that oil reserves in the US, the world's largest petroleum market, are actually rising.

According to the American Petroleum Institute, US gasoline stocks now are 8.4m barrels above last year's bloated levels, a stockpile that is some 20m barrels or 10% higher than normal for the time of year.

The US consumes 40% of world petrol supplies, but both imports and domestic production have been rising, leaving stocks high.

Estimates in a survey for the Reuters news agency showed OPEC maintaining greater adherence to output limits, trimming output to 26.14m barrels per day in May.

That translates to 88% OPEC compliance with the targetted cuts, an improvement from 76% in April.

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