COMMODITY REVIEW AND OUTLOOK
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800-634-3194(March 15, 2000) ENERGY COMPLEX: Is the old OPEC (Over Producers Executive Committee) about to return? An Iranian official said, "OPEC has to arrive at a solution that takes into account the realities of the market. It doesn't matter whether the leakage is officially legitimized, or not, as long as it is accepted de facto." What's interesting is that this call for producing more than quotas call for is thought to have the support of most major producers. A Saudi spokesman said that producers would increase output in order to satisfy world demand. Countering (or supplementing, I'm not sure which) their talk of bending quotas out of shape, Iran is hawkish, and only wants OPEC to produce 700,000 bpd, rather than the 2.5 million the U.S. would like to see. The Saudis and Venezuelans would like to see an increase of 1.5 million bpd. OPEC's production cuts have equaled on the order of 4 million bpd. Stay nimble as the market may be very happy or conversely very disappointed with whatever production increase is announced. Like the news that OPEC had decided to curtail production, it is possible that this is a momentous decision signaling a decline in prices. Just don't lose sight of the fact that supplies at various points may still show a drawdown and supplies for the near term may remain tight, meaning the occasional solid rally.
M. Steven Morgan
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