VIENNA, 15 June 2005 — OPEC yesterday said it would increase its oil output in July as it sought ways of stabilizing prices and ensuring there was enough oil on the market to meet demand fueled partly by China’s fast-growing energy needs.
“Starting next month there will be new real oil from Saudi Arabia, Kuwait and the Emirates,” OPEC president, Kuwait’s Ahmad Fahd Al-Sabah, said in Vienna as the organization prepared for a ministerial meeting here today.
The boost will see OPEC pumping just above its current level of almost 30 million barrels per day and is part of plans to achieve a 30.5 or 31-million-barrels per day output level in the fourth quarter, Al-Sabah said. Oil demand traditionally rises as winter hits the northern hemisphere and OPEC is bracing for a particularly sharp increase this year because of the energy shortage in China.
OPEC’s real output of crude is already way above its production ceiling of 27.5 million barrels per day (bpd).
The ministers were also mulling plans to raise this quota by half a million barrels per day at today’s meeting, and then do so again within a few months. Saudi Minister of Petroleum and Mineral Resources Ali Al-Naimi, has led calls for an increase and his counterparts from Algeria, Libya and Nigeria have signaled that they support the move.
Asked by reporters whether he favored a second increase later, Naimi told reporters: “There is nothing wrong with it.”
The sentiment was echoed by Nigeria’s top oil official Edmund Daukoru, He argued that the organization should raise the production ceiling by 500,000 bpd today, then leave it up to Al-Sabah to raise it again by the same amount later if necessary to make for flexibility and to avoid another ministerial meeting.
“The demand looks strong in the third quarter perhaps continuing into the fourth quarter. We are coming into the strong season, hurricanes, etc,” Daukoru said.
“If we do not leave some flexibility it is madness ... If not, we will come back again before September.”
But the ministers agreed that a quota increase would be a largely “symbolic” gesture given the real production levels and the fact that there is no crude oil shortage on the market. “Physically there is no problem. Increasing the ceiling by 500,000 will only affect the price psychologically,” Libyan Energy Minister Fathi Ben Chatouan told reporters in Vienna.
OPEC’s 11 member states profit from high prices but are concerned about stabilizing the market for fear that price spikes could bedevil global growth.
Al-Sabah has said a quota increase would mark “a first step” in bracing for the fourth quarter, which is already making the markets nervous because of concern about China’s spiraling demand. Barclays Bank analyst Kevin Norrish said that since China is experiencing an energy shortage there was the risk that its demand would rise further during the summer rather than slow down as has been expected, he said.
New York’s main contract, light sweet crude for delivery in July, lost 22 cents to $55.40 per barrel in early deals.
In London, the price of Brent North Sea crude oil for delivery in July shed 50 cents to $54.28 per barrel.