The Observer: Opec's new price shock: “BP is one of four oil and energy companies looking to sell off part of its chemicals operations - others include Royal Dutch/Shell, Total and BASF.” (ShellNews.net)
Producers to send warning to consumers and companies
Heather Stewart, economics correspondent
Sunday September 12, 2004
Opec, the oil producers' cartel, is poised to raise its target price range for a barrel of crude this week - delivering a harsh message to oil-guzzling economies to get used to a $30 floor under prices.
Ministers from Opec's member nations meet in Vienna on Thursday, and will discuss the future of the $22 to $28 target band, which has been breached continuously since December last year.
Several countries, including Venezuela, which is already pumping at capacity, have signalled that they believe the target is now unrealistic. Purnomo Yusgiantoro, Opec's president, said last week: 'The price range we have today of $22 to $28 a barrel was decided back in 2000. There has to be a different price range today.'
Prices have been boosted in recent weeks by concerns about the security of supplies from the embattled Russian firm Yukos, and the slower-than-expected restoration of oil exports from Iraq.
But analysts say the basic problem is the fastest growth in demand for a generation, coupled with long-term underinvestment in oil infrastructure.
Raising the band would send a warning to consumers and companies that they should accept $30 a barrel as the norm, and give Opec a more realistic target.
'It would be symbolic. It would be a signal that Opec thinks something has changed in the oil market,' says Kevin Norrish, commodity market analyst at Barclays Capital. 'Otherwise, the target just becomes completely irrelevant.'
He believes that the current price rise also reflects an underestimate of how quickly production from mature fields, including in the North Sea, would decline. Britain recorded a trade deficit in oil in July for the first time in 13 years.
But explicitly targeting a higher price would risk the fury of politicians keen to see energy costs brought under control. Chancellor Gordon Brown said on Friday he had asked Opec to 'signal the action needed to bring prices to a level consistent with sustained world growth'.
Economists have become concerned about the health of the global economy since oil prices took off in the summer. Opec pledged to stabilise the market, but have already ramped up production by 1.5 million barrels per day to 29.3m in the last four months with little impact on prices.
Thursday's meeting is likely to result in another small rise in production quotas, but since Opec members are are already breaking their official targets, and have little spare capacity, analysts say it will be little more than an acceptance of reality.
BP chemical sale
BP IS set to make £2.3bn from the sale of around half of its petrochemicals division. The company is aiming to float the Olefins and Derivatives division of its chemicals business next year.
BP is one of four oil and energy companies looking to sell off part of its chemicals operations - others include Royal Dutch/Shell, Total and BASF.
http://observer.guardian.co.uk/business/story/0,,1302382,00.html