KUWAIT CITY, 10 April 2005 — OPEC’s president said yesterday there was no need for an imminent output increase after oil prices eased, but he believed the market would still impose a proposed rise of 500,000 barrels per day (bpd) in May.
“The price started to come down now. It’s even below what it was in Isfahan, so the reason for starting the discussions (to raise output) has been removed,” said Ahmed Fahd Al-Sabah in reference to last month’s OPEC meeting in Iran. “(But) I think the market behavior will force producers to increase production in May... This is my belief as (energy minister of) Kuwait,” he told reporters.
“I think the 500,000 barrels increase will come any way... before June,” said the OPEC chief, adding that global demand for oil is estimated to rise by one million bpd in the third quarter.
World oil prices fell Friday for the fourth successive day to dip below $54 a barrel as supply concerns that drove the market up to record highs earlier this week eased. New York’s main contract, light sweet crude for delivery in May, dropped 79 cents to finish at $53.32 a barrel. At one stage the contract fell under $53. It has lost about $4 over the week.
In London, the price of Brent North Sea crude oil for delivery in May slumped $1.15 to $52.89 a barrel.
Ahmed said on Monday that he had initiated talks with OPEC ministers to consider raising output by half a million bpd after prices rallied to new record highs. “I believe that we have to continue with our communications even if the price now” is below what it was during the Isfahan meeting, he said. “We have to continue because this is a special period in April and May.”
“If the prices go over average and we need to increase, we should do it or (at least) we have to prepare ourselves for the third quarter because all indications say there will be an increase in demand,” Ahmed said. He defined “average price” as the oil prices that existed at the time of the March 16 OPEC meeting in Iran. The minister said he holds daily telephone conversations with OPEC members to assess “the situation and stability of the market”.
Data released Wednesday from the US Department of Energy (DoE) showed that US refineries operated at 93.7 percent of capacity in the week to April 1, up from 91.1 percent the previous week.
The higher capacity level, a result of refineries increasing production after undergoing maintenance, pushed gasoline production to more than 8.6 million barrels per day (mbpd), the DoE said. That eased supply worries ahead of the start of the US summer driving season in late May.
Meanwhile, Algerian Energy Minister Chakib Khelil said yesterday he saw no reason for Algeria to increase oil production as stocks were good and the market was well supplied. He said the key problem right now was refining and not production.
“Why should we increase production? Stocks are good and the market is well supplied. I do not see why we should increase production if our refining capacities are limited,” Khelil said. “Refineries are producing at full capacity, most of them reached 95 percent of their capacities,” the minister said.
Referring to recent record oil prices, he said that this was due to speculation and not to a lack of oil in the market.
“The market is even better supplied than last year.” But the minister cautioned about a strong dollar.
“There is also the impact of a strong dollar that could lead to a drop in oil prices.” He was however positive about being able to fill the summer demand for oil which is expected to be high. “We will be able to meet the summer demand,” Khelil said. The minister was speaking during a ceremony to announce winners of a bid for gas and oil exploration in Algiers.