- The Washington Times - Tuesday, November 20, 2001

LONDON (Agence France-Presse) The price of oil tumbled to fresh two-year lows yesterday, with no sign of a resolution to the price war brewing between major world crude producers loath to give up their market shares.
In New York, December-dated light sweet crude fell 31 cents to close at $17.72 after slumping to a 29-month low earlier in the trading session.In London, a barrel of Brent North Sea crude for January delivery fell as low as $16.65 before stabilizing at $18.01, up 26 cents from the previous close.
The stand-off between the Organization of the Petroleum Exporting Countries (OPEC) and nonmembers continues.
OPEC energy chiefs shocked the market last week when they said they would not cut output again until rivals outside of the 11-nation cartel also make significant reductions in their exports.
Key non-OPEC producers Russia and Norway have shown little appetite for production cuts, to the frustration of OPEC.
Russia offered yesterday to create a parallel structure to OPEC with other non-cartel oil producers to help stabilize prices, the RIA news agency reported.
The proposed structure, which would be informal, would mostly serve as a means to exchange information among participants, according to the report.
While low oil prices are a timely boon to oil-importing countries in the grips of an economic slowdown, they are a major headache for crude exporters that rely on oil revenues to keep their own economies motoring along.
"It is far from clear at the moment whether OPEC or non-OPEC producers will blink first, but one thing is certain, OPEC has raised the tension between the two groups," the London-based Center for Global Energy Studies said yesterday.
"One lesson that should have been learned from 1998 is that non-OPEC producers can withstand lower oil prices than OPEC members, suggesting that OPEC's bluff may be called at the end of the year," the think tank said in its Monthly Oil Report.
But the researchers said prices were unlikely to fall as low as $10 a barrel, as Kuwaiti Oil Minister Adel Sebeih warned they might last week.
If global oil output were to remain steady until 2002, Brent prices would stabilize at about $17 a barrel in the first half of 2002, the researchers predicted.
In order for prices to fall as low as $10 a barrel, production would need to remain unchanged and there would have to be almost no growth in demand in 2002, it said.
"However, such a scenario defies economic logic," the report said.
"It is almost inconceivable that the 45 percent drop in annual average crude-oil prices implied in this scenario would trigger no increase in oil demand," it added.


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