LONDON, 29 May 2004 — Oil prices marked time yesterday as traders sat on the sidelines ahead of a long weekend and an OPEC meeting next week at which producers may boost production or even suspend their system of output quotas. The price of benchmark Brent North Sea crude oil for delivery in July rose 15 cents to $36.40 per barrel late afternoon trading in London.
New York’s light sweet crude contract for July edged down six cents to $39.38 in early deals.
The reference US contract tumbled $1.26 to $39.44 on Thursday, showing a loss of more than two dollars from a peak of $41.85 reached in electronic trading May 17. Trading was winding down ahead of a three-day holiday weekend in the United States and Europe, said Societe Generale analyst Frederic Lasserre in Paris.
“There’s a sort of conflict between those who do not want to stay short of oil over the weekend because of the political context and those who don’t want to stay long (holding oil) ahead of the OPEC meeting amid talk of raising the output quota or even suspending the quota system to send a strong message to the market,” Lasserre said.
A suspension of OPEC production quotas is an option that could be discussed at the ministerial meeting of the cartel in Beirut next week, a source close to OPEC said in Vienna where the grouping is based.
“Suspending the quotas could be one of the options available to the organization to send a strong message to the markets that OPEC is doing something real to curb oil prices,” he said.
His comments were in line with a report yesterday in the Wall Street Journal’s European edition.
The Journal said producers in the Organization of Petroleum Exporting Countries could allow each member to put as much oil as it wanted on the market, which would in effect mean a suspension of the output quota mechanism.
OPEC ministers meet in Beirut on Thursday to discuss a Saudi proposal to lift the organization’s official production ceiling of 23.5 million barrels per day (bpd) by at least two million bpd.
Traders were also encouraged by remarks from OPEC President Purnomo Yusgiantoro, who reportedly said the organization would consider one option of raising output by more than 2.3 million barrels per day.
Yusgiantoro, who is also the Indonesian energy minister, has acknowledged that OPEC is already pumping two million bpd above its own official quota.
But traders noted that there were limits to how much extra oil OPEC members can export. “They talk about a big increase in quotas, but where will they get the oil from?” asked one London trader.