OPEC agrees to enhance oil production: decision may ease mounting prices


Edited by Amanullah Bashar
Mar 28 - Apr 03, 2005



OPEC has agreed to raise its production ceiling to the tune of 500,000 bpd at the end of 135th meeting held in Ispahan last week. The extra supply would hence push up daily output to 27.5 million bpd from 27 million bpd.

Besides the increase in the ceiling, the cartel will have yet a fresh 500,000 bpd increase in the ceiling in near future.

Quoting sources, who wanted not to be named, the report says that declined to refer to the exact timing of further increase in the supply by 500,000 bpd. The second extra supply package (500,000 bpd) might happen anytime and it would be announced by the OPEC president. The OPEC oil ministers would hold a meeting in June.

Saudi Arabia, Kuwait ready to raise quotas

Saudi Arabia and Kuwait are ready to pump more oil to the markets.

Kuwait will increase its output by 120,000 bpd in April and the Saudis say they have already increased output by 250,000 bpd since February and are ready to add more in April.

Kuwaiti Oil Minister Sheikh Sabah al-Ahmad al-Sabah announced his country's readiness for output increase in an interview with reporters early Wednesday. Saudi Oil Minister Ali Naimi has voiced pleasure over increase in OPEC's daily output.

Speaking to reporters after the OPEC meeting, Naimi said the market decides prices.

Saudi Arabia proposed a 500,000 bpd increase in the OPEC's output in midst of rising prices. OPEC producers have agreed a two percent increase in oil supplies in an effort to check rising prices.

However, Iran's Oil Minister Bijan Namdar said dollar devaluation main cause of price hike. He said the main reason behind increase in oil prices is depreciation of dollar and concern over likely fall in the future supply. In an interview with reporters before the 135th Ordinary Meeting of the OPEC Conference Zanganeh said, "On account of growing demand for sweet and light crudes, the prices of heavy crude pick up speed and consequently crude prices climb." He said, "Dollar has lost ground against other currencies and the prices have been affected."



World oil prices edged higher on Tuesday as analysts saw a Saudi proposal to boost OPEC's production ceiling as insufficient to calm red-hot crude prices being stoked by rising demand.

Iran's oil minister also said that oil market would receive a positive message in light of OPEC decision to raise its output by 500,000 bpd.

Speaking to reporters at the end of the 135th Ordinary Meeting of the OPEC Conference, Zanganeh said OPEC would do its best to stabilize oil market with least fluctuations. Zanganeh said OPEC is not provided with all necessary mechanisms, adding that OPEC would continue consultations with all members whether to give a fresh boost to its output to the tune of 500,000 bpd.

He said the OPEC extraordinary meeting is slated for June 1, 2005, adding that OPEC's official ceiling will increase by 500,000 bpd as of May 1. Zanganeh said Iran holds a 14 percent share in total OPEC output and the increase to the official ceiling of the cartel as approved today would push up Iran's official quota by about 70,000 bpd.

Indonesian Energy Minister Purnomo Yusgiantoro said that all OPEC members are in agreement to raise production ceiling by 500,000 bpd to lower the demand though prices are still high.

Yusgiantoro told IRNA that in case of further need for output boost, the OPEC president would enter into talks and contact all members on whether the move should be taken.

The minister said the time of the daily output increase has not yet been set but it would be made known after necessary consultations. He ruled out claims that high prices are due to fundamentals, saying other key variables, such as speculations and geopolitics are effective in the process.

The minister said if the members observe market fundamentals, the prices would start falling from spring. "Our estimation is that drop in demand should amount to 1.3 million bpd that is consistent with International Energy Agency estimates.

He said that the OPEC members have postponed decision to elect the next secretary general of the cartel. Iran and Kuwait have fielded candidates for the post.

Nigerian presidential oil advisor Edmund Dakouru said that OPEC is not capable to meet market demands. Dakouru said although OPEC has not the capacity to offer two million bpd oil to the market, it is expected to do it. Asked to comment on unilateral decision of Kuwait and Saudi Arabia to pump more crude to the market, Dakouru said he did not think their decision would be unilateral. Saudi Arabia and Kuwait have announced they were capable of pumping more oil to the markets. Kuwait will increase its output by 120,000 bpd in April and the Saudis say they have already increased output by 250,000 bpd since February and ready to add more in April.

Kuwaiti Oil Minister Sheikh Sabah al-Ahmad al-Sabah announced his country's readiness for output increase in an interview with reporters early Wednesday.

OPEC President Sheikh Ahmad Fahad al Ahmad al Sabah said on Wednesday that OPEC is doing all within its power to restore order and stability to the market, to the benefit of all parties.

Giving an opening address to the 135th Ordinary Meeting of the OPEC Conference, al Sabah said OPEC's move last year to increase official production ceiling by, altogether, 3.5 million barrels a day contributed significantly to the subsequent easing of oil prices, with the basket being close to a more moderate 35 dollars a barrel for much of December.

Moreover, he said, some of OPEC members were speeding up the implementation of their capacity expansion plans so as to enhance the Organization's ability to cope with possible future supply distributions. He said as a result, OPEC's share capacity is rising again and is expected to exceed three million bpd or ten percent-by year end.

OPEC has the resources to meet the growing oil requirement that has been forecast for the early 21st century, and is committed to ensuring that the market remains well-supplied with crude at all times, said Sabah.

The official said OPEC will maintain and develop sound investment strategies, and will ensure that these are put into effect, in a timely and sufficient manner, to provide the required production capacity for oil that is cleaner, safer and more efficient than ever before. This includes ensuring that enough spare capacity is available to smoothly cope with unexpected surges in demand, whenever they occur. However, emphasized Sabah, all those are a shared responsibility. Our market-stabilization measures will only be truly effective if they receive the full support of other oil producers, the international oil companies and all other interested parties in the market.

He went on to say that much progress has been made in this regard in recent years and OPEC welcomed that, looking forward to a continuation of that in the future.

He said just as oil fuelled the economic growth of today's industrialized countries in the last century, it should have the same important role to play in the emerging economies of Asia, Africa and Latin America.

Omani Oil Minister Mohammad bin Hamad al Rumhi said on Wednesday that high prices have nothing to do with market mechanisms, i.e. supply and demand.

Rumhi told reporters as an instance that a bomb blast on a corner of the world would push up prices suddenly. He said market nerves and jitters could prompt increase in prices. (Courtesy Tehran Times)