KUWAIT, 10 May 2005 — OPEC’s president said yesterday the oil market is oversupplied and that any increase in output at the organization’s meeting next month must take into consideration prices and growth in demand.
“The OPEC-10 real production now in the market based on our latest information from OPEC and other sources is 29.7 million barrels per day (bpd)”, Ahmed Fahd Al-Sabah told reporters. “We believe there is two million bpd of overproduction in the market ... In the third quarter the required demand from OPEC-10 will be 28.5 million bpd,” he added.
“For June, I can’t say anything for now. But we have to study the market, the behavior of prices and growth of demand,” the OPEC chief said in response to a question if OPEC might increase output at its June 15 meeting. “This is something that will depend on the members,” said Ahmed, who is Kuwait’s energy minister. The minister ruled out any cut in supplies. “As Kuwait, I don’t think there is a need to cut (supplies) because in the fourth quarter our production should be more than 30 million bpd,” he said.
Ahmed said production would continue at the current level in the third quarter. At the start of last week, OPEC’s president said the organization members excluding Iraq were producing 29.7 million bpd, 2.2 million bpd above the official quota, and there was no immediate need to pump more oil.
During a meeting in mid-March in the Iranian city of Isfahan, the Organization of Petroleum Exporting Countries decided to raise its output ceiling by 500,000 bpd. It envisaged an additional rise of 500,000 bpd if prices remained high from then until June.
Meanwhile, Venezuela’s foreign minister and former OPEC president, Ali Rodriguez, called yesterday for a return to the price range system set by the oil organization in an effort to keep supply and demand in balance.
Rodriguez said restoring the price range, which was suspended in January by OPEC, may help stabilize crude oil prices. “There is a tension that in my view, should lead to an international agreement between the major energy producers and consumers,” Rodriguez said during a visit to Brazil, where he was attending an unprecedented summit of 34 Arab and South American nation.
Such an agreement would ease “price volatility,” the Venezuelan official said. The current instability in the market “affects consumers disproportionately when prices rise and producers when prices fall,” he said.
The price range would allow producers “to guarantee revenues to maintain investment and production” and at the same time assure the market of adequate supplies, he added.
However, world oil prices rose yesterday. New York’s main contract, light sweet crude for delivery in June, added 34 cents to $51.30 per barrel in early deals. In London, the price of Brent North Sea crude oil for delivery in June gained 14 cents to $50.91 per barrel.
“Support for oil prices is coming from a feeling that oil stocks may not be high enough for the peak demand season in the US later in the year, and concern that much of the crude oil stocks are made up of sour crude, which yields less gasoline,” analysts at the Sucden brokerage firm said.
The market focus was shifting to gasoline — or petrol — as many Americans prepared to take to their cars for the summer vacations traditionally beginning on the US Memorial Day holiday on May 30.