OPEC oil price falls below $50/bbl for first time since June

London (Platts)--17Nov2005

OPEC's oil benchmark fell below $50/bbl for the first time since June,
the producer group said on Thursday, a level analysts expect may prompt some
members to call for cutting output.

     The OPEC crude price fell 28 cts Wednesday to $49.73/bbl, the lowest
since $49.30 on Jun 1. Prices have been declining because a spell of warm
weather in the US and Europe has eased concern of tight winter fuel supplies.

     OPEC has been pumping crude near full tilt during 2005 to allow consumers
to build up inventories before demand reaches an annual peak in the final
three months of the year. While the 11-country group has no formal goal for
prices, some analysts see $50 as the cartel's de facto target.   

     "OPEC wouldn't want to see the prices fall too far below $50," said Kevin
Norrish, an analyst at Barclays Capital. "This is a level of comfort, the
breaching of which we would expect to occasion at least a tightening in
producer rhetoric," Barclays said in a report.

     The OPEC crude basket, an index of 11 crudes, has fallen from a record
high of $61.37 Sep 1, after Hurricane Katrina disrupted output in the Gulf of
Mexico. Supplies in the Gulf are recovering and forecasters such as the
International Energy Agency have cut forecasts for growth in world oil demand.

     'MORE REASONABLE'

     OPEC officials this week played down speculation of cutting supply to
stem the price slide, saying oil prices have moved to a more reasonable level.
OPEC oil ministers meet Dec 12 in Kuwait to set supply policy.

     "Prices are now at levels more reasonable given market fundamentals,
compared to the increases we saw in August and October," OPEC's acting
secretary-general, Adnan Shihab-Eldin, said Monday in Algeria.

     OPEC's benchmark comprises Algeria's Saharan Blend, Indonesia's Minas,
Iranian Heavy, Iraq's Basra Light, Kuwait's Export, Libya's Es Sider,
Nigeria's Bonny Light, Qatar's Marine, Saudi Arabia's Arab Light, Murban of
the UAE and Venezuela's BCF 17.

     The cartel began using the 11-crude basket instead of a benchmark
composed of seven grades in June. It has not set a new price target since
ditching in January a goal to keep the seven-crude basket between $22 and $28.

     --Alex Lawler, alex_lawler@platts.com


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