Newspaper article THE JOURNAL RECORD

Producers Must Deal with Volatile Oil Prices / Says Oil Trader

Newspaper article THE JOURNAL RECORD

Producers Must Deal with Volatile Oil Prices / Says Oil Trader

Article excerpt

With the Organization of Petroleum Exporting Countries unlikely to achieve a fixed oil price, independent producers must become more attuned to marketing oil amid volatile prices and less concerned with reserves, according to Andrew Avramides, a world oil trader.

Without an OPEC agreement (aimed at a fixed price of $18 a barrel), world oil prices are likely to go down to a range of $8 to $10 by March or April with a normal winter, and then stablilize at $14 to $16, said Avramides, who was in Oklahoma City to address the Economic Club of Oklahoma Monday night.

However, Avramides made the point that a new approach to the market - learning to survive despite volatile prices - is more important than worrying about forecasts, which are subject to numerous uncertainties. These include OPEC members with different objectives, other producing nations, political problems, the futures market and even winter weather.

"Producers must get production and sell for cash in this market," said Avramides. "They must learn to pay attention to what is going on in the world market and find clever ways to sell production. They even need to learn to say `no' some times.

"For a long time, indpendent producers have been concerned about reserves. A little planning is all right, but we have to expect volatile prices for some time. Even if prices stabilize at $14 to $16, that is volatile."

Avramides, a Brooklyn native who is based in London, has been involved in the world oil market since 1969. He currently is international oil advisor for Deleon Co., which advises oil firms worldwide. He also is managing director of Avra Petroleum Ltd., which buys oil from independent producers worldwide and sells it to refiners.

OPEC's pricing committee has recommended a fixed price of $18 a barrel, but Libya has called for a price as high as $28 a barrel. The point of Avramides is that OPEC members are expected to have a difficult time reaching a production agreement to achieve a fixed price, because there are so many differences now among the member countries.

"They have different objectives," he said, "with different political problems, and they are represented by different people from those who formed the embargo starting in 1974.

"Even if the OPEC members can achieve a fixed price, they can't control the production of the rest of the world, and they can't control demand."

Current world production amounts to about 45 million barrels of oil a day, said Avramides. The United States accounts for about 15 million barrels of the worldwide market. …

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