TEHRAN, 15 August 2004 — OPEC can do nothing to douse scorching oil prices when markets are already oversupplied by 2.8 million barrels per day (bpd) of crude, Iran’s OPEC governor said yesterday, warning that prices could fall sharply.
“Now there are more than 2.8 million bpd of crude more than demand,” Hossein Kazempour Ardebili was quoted as saying on the Iranian Oil Ministry website.
“There is no reason for OPEC members to increase production,” he added. “This organization is unable to do anything at present.”
Oil futures prices raced to record highs on Friday, further boosted by a US refinery fire, underpinned in a long term rally but soaring demand led by China and fears of disruption to supply, particularly in Iraq.
US crude oil futures hit $46.65 a barrel, the latest peak in a series of record highs in all but one of the last 11 trading sessions.
Iran is OPEC’s second-biggest producer but like all its fellow members but for Saudi Arabia, it has no spare capacity left to contribute to a further rise in OPEC’s production after the group’s most recent 2.5 million bpd quotas hike agreed in June.
Iran’s attempts to lift capacity further are weighed down by cumbersome investment deals.
“It seems that prices will continue to go up without taking into consideration the basic elements of the market, supply and demand,” Kazempour said. “The current trend of prices stems from political and military developments.”
He reiterated that oil prices could still crash if security fears subsided.
“If a calm political and military situation prevails in the market, the amount added to crude reserves will pressure the price,” he said.
The Organization of the Petroleum Exporting Countries, due to meet next on Sept. 15, is already pumping at a 25-year high of 30 million bpd, casting aside the restraint of official quotas.
Saudi Arabia is producing around 9.5 million bpd is expected to reach near 10 million bpd in September. Iran, however, is straining to produce nearly four million bpd against a quota of around 3.8 million bpd.