OPEC considers more oil as price slides

Discussion in 'Peak Oil' started by Quigley_Sharps, Sep 18, 2005.

  1. Quigley_Sharps

    Quigley_Sharps The Badministrator Administrator Founding Member

    VIENNA (Reuters) - OPEC oil producers on Sunday considered lifting supply to allay consumer country concerns about energy security after Hurricane Katrina pushed crude prices over $70 a barrel.

    Under pressure from importing nations, the Organization of the Petroleum Exporting Countries begins a two-day meeting on Monday that could increase output just as fuel demand starts to buckle under the impact of high prices.

    Crude has fallen from a record $70.85 a barrel in the three weeks since Katrina tore into U.S. Gulf refineries, losing $1.75 on Friday to close at $63.

    "For OPEC the price is still very high," OPEC President Sheikh Ahmad al-Sabah told reporters in Vienna.

    Sheikh Ahmad met European union"" Energy Commissioner Andris Piebalgs in Vienna on Sunday to stress that OPEC wanted to prevent inflated energy costs hurting global economic growth.

    "The political pressure to increase output will be well balanced by market reasons not to do so," said U.S. consultancy PFC Energy.

    Ministers will consider a proposal by Sheikh Ahad to add 500,000 barrels a day, 2 percent, on existing limits of 28 million bpd. Iraq, with no quota, pumps an additional 2 million bpd.

    But OPEC is warning that any cartel agreement may not actually deliver more crude because global refining is already stretched to full capacity.

    For some that means no increase is warranted.

    "The market should rest assured that whatever it needs is there. Before that there is no need to do anything," said Nigerian Oil Minister Edmund Daukoru.

    With nearly 900,000 bpd of U.S. refining still shut after Katrina the only producer able to pump more, Saudi Arabia, cannot find buyers.

    "The talk of an increase is mainly to give comfort to the market," said Daukoru. "It is refining capacity we have to worry about."

    "We don't want to see that we are facing an international economic slowdown because that is not to our benefit," said Qatar Oil Minister Abdullah al-Attiyah.


    OPEC does not appear concerned yet about forecasts that cut demand growth projections for the rest of 2005 and 2006.

    The impact of high retail gasoline prices combined with a sharp slowdown in Chinese demand growth and the knock-on effect of Katrina on U.S. economic activity means slower fuel demand growth.

    The International Energy Agency (IEA), adviser on energy to 26 industrialised nations, recently sliced its forecast for world demand growth this year to 1.35 million bpd after 2.9 million bpd of growth in 2004.

    While the perception among some consumer countries is that OPEC has starved the world of crude, IEA figures show the cartel has come close to matching the pace of demand growth, even before extra non-OPEC oil.

    The IEA says that from 2002 to 2005 global demand has risen 5.8 million bpd while OPEC, assuming steady output for the remainder of this year, has added 5.6 million bpd of supply.

    Non-OPEC producers led by Russia, have pumped an additional 2.5 million bpd since 2002.

    That means global crude supplies have risen 10.5 percent over the past 3 years, outweighing the 7.5 percent of demand growth over that period by 2.3 million bpd.

    Refinery capacity though has not matched demand growth, rising by just 0.5-1.1 percent per annum worldwide since 2000, according to oil major BP, causing supply bottlenecks in consumer countries.

    Some in OPEC worry it may go too far in trying to calm consumer country concerns.

    OPEC experts in a report for ministers calculate the call for cartel crude in the fourth quarter 2005 at 30.3 million bpd, in line with output now of 30.2 million.

    That would mean only a minor stockdraw of 100,000 bpd in the fourth quarter during the winter period when inventories normally draw heavily.

    OECD commercial crude stocks at 54 days of forward demand are already running 2 days ahead of this time last year.
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