VIENNA, 16 September 2004 — OPEC will increase its oil production target by one million barrels a day later this year in a move widely viewed as more symbolic than significant, given that the organization has been exceeding the new output limit since the beginning of the year.
Kuwaiti Oil Minister Sheikh Ahmad Fahd Al-Ahmad Al-Sabah said yesterday the Organization of Petroleum Exporting Countries agreed to the decision to raise output by nearly 4 percent, adding it would take effect from Nov. 1. “We will give a signal to the market that we are working hard for the stability of the market,” he said.
“It’s a gesture of good will to the consumers that we want lower prices,” Algerian Oil Minister Chakib Khelil said.
The move will increase OPEC’s output limit for all its members from 26 million barrels a day to 27 million barrels, but the organization is already producing 27.4 million barrels and accounts for one-third of the world’s oil supply.
Crude prices in New York and London climbed to record highs earlier this summer, but have eased in recent weeks. In yesterday’s trading, US crude futures were up 61 cents at $45 a barrel on the New York Mercantile Exchange, moved largely by government data showing a decline in inventories. The all-time high reached on Aug. 19 was $48.70 a barrel. October Brent crude was up 32 cents at $42.05 in trading on London’s International Petroleum Exchange.
A proposal by the OPEC’s board of governors to increase the price band for its basket of crudes, currently at $22 to $28, will be made at a meeting on Dec. 10 in Cairo. Prices have long been well above the upper end of the band, which is the organization’s preferred selling range. OPEC’s basket price, currently in the $39 a barrel range, is lower than prices in the United States because that market requires a higher grade of product.
Minister of Petroleum and Mineral Resources Ali Al-Naimi reiterated that prices for oil remained too high in the wake of voracious demand by China and the United States. He said Saudi Arabia has 1.5 million barrels of spare capacity.
Abdullah ibn Hamad Al-Attiyah, Qatar’s oil minister, said that raising the output target would result in stability. “We believe that there is more oil in the market... We believe that all this production will give more market stability,” he said.
The decision doesn’t apply to significant oil producers like Russia and Norway, the world’s second- and third-biggest producers who are not OPEC members.
Indonesia’s Purnomo Yusgiantoro, OPEC’s president, urged them to follow OPEC’s lead, but Russian Oil Minister Andrey Greus didn’t commit. “We are interested in the stability of prices and more predictability,” he said through a translator.
Thorhild Widvey, Norway’s oil minister, who will speak to OPEC this week, has said the Nordic country, which produces approximately 2.9 million barrels a day, has no spare capacity.
