KUWAIT CITY, 24 February 2005 — OPEC could increase oil output if prices increase further, the cartel’s president and Kuwaiti Energy Minister Sheikh Ahmad Fahd Al-Sabah said yesterday. “If prices continue to increase, there will be a reaction from OPEC to help reduce these prices as it did throughout 2004,” he told reporters.
“I believe this issue (hiking output) is still premature, but as we did in 2004 to preserve the stability of prices, I believe we will continue in this direction because this is part of OPEC’s strategy,” he added. “Yesterday (Tuesday), prices went up again. For that reason, we cannot support or reject” hiking production, he said. “But what I can assure you is that we will do now as we did in 2004, being that we will not let prices increase sharply and we will work to stabilize prices in the market and guarantee stability of crude oil supplies.”
On Tuesday, the OPEC president said there was no need for the oil organization to cut output at present, but that the market must be monitored carefully.
World oil prices rocketed to three-month highs Tuesday as a cold snap gripped the northeast United States and parts of Europe and following Sheikh Ahmad’s statement, traders said.
Meanwhile, world oil prices fell yesterday, remaining above $51 a barrel in New York.
New York’s main contract, light sweet crude for delivery in April, fell 22 cents to $51.20 a barrel in early deals. The March contract had surged $2.80 to close at $51.15 a barrel before expiring — the first time it has breached the $50 mark since November — as temperatures fell in the United States’ northeast and parts of Europe. In London, the price of Brent North Sea crude oil for delivery in April dropped 22 cents to $48.40 a barrel yesterday. “The slight weaker tone (of oil prices) may be because of OPEC,” Bache Prudential trader Christopher Bellew said.
The market, meanwhile, remained focused on the colder weather, particularly in the United States’ northeast — a major consumer of heating fuel. There is still “cold weather in the background”, Bellew said.
“Cold weather is expected over the next 10 days in the northeast of the US,” he added. That would keep oil prices under pressure as demand for heating fuel rises, analysts said. “There are expectations that oil prices will remain pretty firm for the remainder of the (northern hemisphere) winter,” Seymour Pierce analyst Richard Slape said.
Traders were expected to keep an eye on both heating fuel and gasoline stock levels when the US Department of Energy published its weekly snapshot of commercial crude inventories on Thursday. “The question is what will happen once the winter comes to an end, when we switch from heating oil demand to gasoline demand?” Slape said.
“The gasoline inventories are higher than there were last year and it could put some downward pressure on prices. Tomorrow afternoon will be the next driver upwards or downward for prices,” he added.