Thursday, November 11, 1999 Published at 06:57 GMT
Business: The Economy
Oil prices at three-year high
Oil exports have been kept in check
The price of crude oil has shot up to a new three-year high ahead of the winter season.
A barrel of Brent crude oil, the industry benchmark, was trading at $24.49 on Wednesday in New York - up $1.57 on the week and more than double the price of $10 a barrel at the beginning of the year.
The news comes ahead of an Opec summit in Vienna at the weekend where the world's major oil-producing countries will discuss plans to extend their production cuts beyond next March.
Venezuelan Energy and Mines Minister Ali Rodriguez said the Organisation of Petroleum Exporting Countries would probably extend its cuts beyond March to offset an expected dip in oil demand in the second quarter of 2000, a view also endorsed by Kuwait.
Mexico, which is not an Opec member, said it would stick to global oil export cuts for three more months beyond their March 2000 expiry, provided other parties to the deal did the same.
Observers have been surprised by the unity shown this year by Opec, in contrast to previous attempts at production cuts, which were often undermined by cheating. They suggest that it will be more difficult now to prevent some heavily indebted countries from cashing in on the higher oil price.
OIl stocks declining
Two reports suggest that demand and supply are now in balance in the industrialised countries. This means that Opec has achieved its key objective, overcoming last year's oil glut.
The International Energy Agency said that oil stocks held by leading industrial nations dropped by 1.8m barrels in September.
The American Petroleum Institute said that crude oil inventories had dropped by much more than expected last week.
Demand for oil usually increases over the winter, as the demand for heating oil rises.
P>"This demand outlook, combined with the expectation that Opec will keep production below 27 million barrels per day through March of 2000, causes us to be constructive on the oil price outlook into next year," said Michael Young of Deutsche Bank.
The rise in the oil price has boosted the stock of the world's leading oil companies.
BP Amoco, the second most heavily traded stock in London, rose 7p to 603.4p, while Shell rose 17p to 479p.
A higher oil price could be bad news for inflation and lead to further interest rate increases around the world.
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