OIL MARKETS SHOW RESPECT FOR NEW OPEC ACCORD
OPEC has shown itself to be in control
of the world oil situation with its speed in hammering out a
pact to limit crude oil output to 16.6 mln barrels per day
(bpd) for the rest of 1987, oil traders said.
    They said market respect for the cartel has increased since
it announced Saturday that it would cut fourth quarter output
to 16.6 mln bpd from the 18.3 mln agreed in December.
    "There are light oversupplies now, but OPEC ... Has ensured
there will be no oversupplies in the fourth quarter, and is in
effect putting pressure on end-users," a European crude oil
trader said.
    In Tokyo, one oil analyst said, "There's no reason to expect
a weak market from now on."
    A Japanese oil trader, also based in Tokyo, said, "We
thought OPEC would have difficulty agreeing on fourth quarter
production so the market will react very bullishly."
    Traders in Singapore said that while there has been only a
slight increase so far in spot quotes for Dubai, a benchmark
crude, they expect price increases over the next few days.
    August Dubai was discussed in cautious early activity at
around 17.35 dlrs, above Friday's 17.15-20 range, but still
below the government selling price (GSP) of 17.42.
    Even prices of light Mideast grades, such as Qatar and Abu
Dhabi crudes, are expected to improve from recent weak
positions, 15 to 20 cents below their GSP's. Singapore traders
said sellers might now aim for GSP's at least.
    They said that after initial jumps, they expect prices to
stabilise and hover around GSPs for the next few months.
    They said the Japanese oil market would be most affected
and Japanese end-users would need to rebuild stocks for winter
requirements before October.
    Prices are most likely to rise in the fourth quarter on
European and U.S. Stockbuilding for winter, they added.
    "There's no doubt consumption will be higher than production
by the fourth quarter and stocks are not that high," said an
international trader in Tokyo. Another Tokyo trader was less
bullish, "For sure there will be some shortage but it depends on
how much they (OPEC members) cheat."
    A Singapore trade source said, "There is enough cheating and
leakage in the OPEC sales system to convince traders there is
no need to worry about shortages."
    Other traders said the questionable Iraqi production level,
after Iraq's rejection of its assigned quota, was a bearish
factor to be considered.
    Traders also said end-users now would buy as much as
possible on term contracts and buy spot only when the market
cooled from its initial reaction to the OPEC agreement.
    Spot product prices in Singapore were little changed in
thin early discussions, with naphtha and middle distillates
quiet on minimal buying interest.
    Fuel oil products were steady to firm on light demand and
tight prompt supplies, dealers said.
 REUTER
