RIYADH, 1 July 2004 — Saudi Arabia’s oil minister said yesterday there was no reason either to increase or lower OPEC production levels, a day before the group was to raise its output quotas by two million barrels per day. Asked by reporters if OPEC would proceed with a scheduled output hike from July 1, Ali Naimi said: “Actual oil prices are fixed by the market and not by OPEC. The price is fair and there is no reason to take a measure to reduce or increase production.
“We need to ensure price stability to stabilize the world economy,” he added, speaking after the opening of an executive council meeting of the Riyadh-based secretariat of the International Energy Forum.
Oil prices fell by about two dollars a barrel on world markets through Monday and Tuesday after the early handover of power in Iraq, the end of a strike in Norway and the repair of two key pipelines in southern Iraq.
However, the price of benchmark Brent North Sea crude oil for delivery in August yesterday rose 24 cents to $33.35 in late morning deals in London. New York’s reference contract, light sweet crude for August delivery, won 18 cents to $35.84 in preopening electronic trading.
“There is still an imbalance between supply and demand in the market,” said Commerzbank analyst David Thomas. “We are still seeing higher demand from the US and China driving stocks down.”
Prices rose after the US Department of Energy reported a fall of 500,000 barrels in US crude oil stock levels to 304.9 million in the week to June 25, while the private American Petroleum Institute put the drop at 4.19 million barrels to 304.61 million.
Faced with record oil prices, OPEC announced in Beirut on June 3 it would raise production quotas by two million bpd on July 1, and by another 500,000 on Aug. 1. Naimi said that OPEC would decide at its next meeting on July 21 whether to “increase or decrease” production.
OPEC President Purnomo Yusiantoro also told the Financial Times yesterday that the organization would confirm on July 21 a decision to increase its output ceiling by 500,000 barrels per day.
According to Naimi, the next meeting would also discuss revising OPEC’s $22-28 price band. “A re-evaluation of the price band ... will be discussed at the next meeting,” he said.
The current price band was introduced by OPEC several years ago to stabilize then highly fluctuating prices. The minister also stressed the Kingdom commitment’s to dialogue between producer and consumer countries “in the interest of the world economy, of which we are a part.”
The US government also estimated that gasoline stocks held steady at 205.1 million barrels, while the API saw gasoline inventories declining by 2.08 million to 204.12 million. Prices had fallen by about two dollars a barrel on world markets through Monday and Tuesday after the early handover of power in Iraq, the end of a strike in Norway and the repair of two key pipelines in southern Iraq.