BEIRUT, 1 June 2004 — Saudi Arabia, Kuwait and the United Arab Emirates could lift oil production by up to three million barrels per day but this would only bring down soaring oil prices in the short-term, an OPEC official said here yesterday.
“Almost immediately, three OPEC countries can produce up to three million barrels more. They are Saudi Arabia, Kuwait and the United Arab Emirates,” Omar Ibrahim, head of the OPEC information department, told AFP. “But its effect will probably not last longer than 48 hours... as supply and demand are not really the problem,” he said on the sidelines of a press conference ahead of Thursday’s OPEC extraordinary meeting in Beirut.
“The current situation will only be solved permanently if we look beyond just supply and demand, we look also at geopolitics, we look at the problems of the United States,” he said.
Ibrahim said the 11-member Organization of Petroleum Exporting Countries was “concerned about global security and stability ... and we are especially concerned about security in our member countries, including Saudi Arabia and Iraq.”
The attacks in Alkhobar, a key center in the world’s largest oil producer, sparked fears that world oil prices would shoot up further, though the effect was muted yesterday as major markets were closed for bank holidays. But OPEC President Purnomo Yusgiantoro of Indonesia said, “we are concerned because we hope that they (the Saudis) are going to be leading in the increase of production.”
“Saudi Arabia is still capable of increasing production because they have spare capacity where the current production is still about 85 percent,” he told reporters in Jakarta.
OPEC’s current output ceiling is 23.5 million barrels a day, but its actual production is estimated at 25.5-26 million, with most members already pumping at their maximum.
But despite such supply levels, oil prices have been on the rise for months, fueled both by security anxieties and massive demand, putting OPEC under heavy pressure from consuming countries to boost output and raising sharply the profile of the Beirut ministerial meeting.
Ibrahim said a decision to increase production or lift the $22-$28-a-barrel OPEC target band in order to bring prices back down below $40 a barrel could be adopted at the OPEC ministerial meeting on Thursday. “But no matter what decision OPEC comes out with, it will certainly send a signal or message to the market and that message will be reacted to positively or negatively depending on the message that comes out,” he said.
“Whether we will increase or not is a decision of the conference ... and I believe that if the conference comes out with a decision to raise or lift the ceiling completely the message will go out, the price might come down, but I do not think it will be for long,” he said.
The OPEC president recently said the organization would study several options in Beirut on Thursday. Yusgiantoro said OPEC could increase its overall production although that option has already been deemed insufficient by the market and consumers in light of the organization’s current output excesses.
Another approach would be to increase quotas by more than 2.0 to 2.3 million barrels a day, notably as Saudi Arabia last week proposed a quota increase of 2.3 million to 2.5 million barrels a day. Yet another possibility emerged Friday as a source close to OPEC said a suspension of OPEC production quotas completely was an option that could also be discussed in Beirut.