VIENNA, 16 June 2005 — OPEC adopted a two-pronged plan to tackle high oil prices and supply problems yesterday, raising the cartel’s oil production ceiling next month and promising another increase later if prices do not fall.
But after its ministerial meeting in Vienna, the Organization of Petroleum Exporting Countries also warned consumer nations and the oil industry that they must tackle a refinery bottleneck which it blames for driving oil prices above $55 a barrel.
“The conference decided to raise the current OPEC production ceiling by 500,000 barrels per day to 28 million bpd, with effect from July 1, 2005,” oil and energy ministers of the 11-nation organization said in their final statement.
OPEC decided yesterday to raise its production ceiling by 500,000 barrels per day on July 1 and might repeat the move by September, an OPEC spokesman said. Minister of Petroleum and Mineral Resources Ali Al-Naimi, who had championed a quota hike at the organization’s ministerial meeting here, told reporters: “It is done”.
Ministers have opted to give OPEC President Ahmed Fahd Al-Sabah a mandate to increase the quota again by September if he determines that such a move is what the market needs.
The move was motivated by “expectations of strong global oil demand during the remainder of the year, in particular in the fourth quarter 2005” and “the resumption of price increases,” they added.
Al-Sabah was also granted the power to make a second increase if necessary before the organization’s next scheduled meeting in September, after consulting his fellow ministers, the statement added.
OPEC insisted that the market was “well supplied”. “Today there is more oil in the market than before. Our message is we are doing our homework but on the other hand we cannot solve the product problem,” Qatar’s Oil Minister Abdullah ibn Hamad Al-Attiyah said.
World oil prices soared yesterday as the market was unsettled by mixed data on US crude inventories despite the OPEC decision to raise its official production ceiling. New York’s main contract jumped $1.30 to $56.30 per barrel in early deals. In London, the price of Brent North Sea crude oil for delivery in July rose 94 cents to $54.67 per barrel.
Oil ministers were adamant that their move to stabilize markets must be accompanied by investment in adequate refineries, which are essential to convert crude oil into products such as petrol or heating fuel.
It repeated call “on industry and consumer governments to urgently address this challenge, which, if left unresolved, will exacerbate oil price volatility”.