KUWAIT CITY, 9 July 2005 — OPEC President Ahmad Fahd Al-Sabah said yesterday that he would resume consultations with the organization’s ministers today on soaring world oil prices and a possible boost to output. “Beginning Saturday, we will start to consult with our colleagues for the prices and to see exactly what would be the situation,” he told reporters. “We will continue consultations with the members in order to (discuss) increasing our production,” Ahmad, who is also Kuwait’s energy minister, said.
World prices had further risen after the organization halted on June 30 the consultations which the OPEC president had started six days earlier to calm soaring oil prices. The prices rebounded yesterday on growing concerns that a hurricane could damage US rigs, and a day after crude futures plunged in the wake of the terrorist bombings in Britain.
New York’s main contract, light sweet crude for delivery in August, rose 88 cents to $61.61 per barrel in electronic deals yesterday. Early on Thursday it had struck a record high point of $62.10 but plummeted by as much as $4.08 before finishing at $60.73. In London, the price of Brent North Sea crude oil for delivery in August rose 60 cents to $59.88 per barrel yesterday. It had hit a historic peak of $60.70 on Thursday.
The OPEC chief said the organization would raise output by another 500,000 barrels per day (bpd) if there was sufficient demand. “If the market will need, which I doubt, we will directly increase our production,” he said. “I think there is no shortage in the supplies. I believe the market is well-supplied. There is almost over one million bpd of oversupply. We are allowing stocks to be built,” he added.
At a meeting in Vienna last month, OPEC decided to raise its production quota by 500,000 bpd to 28 million bpd on July 1 with the option of a second hike of 500,000 bpd before September. However that decision was seen as a symbolic gesture because the organization is already pumping more oil than its current official ceiling of 28 million bpd.
Ahmad said that OPEC raised its output by 210,000 bpd about three days ago and the current actual output of the OPEC members excluding Iraq is between 28.3 and 28.4 million bpd. He said prices have been fluctuating recently mainly because of geopolitical problems and bottlenecks in the US refining capacity.
“The problems are geopolitical and the shortage in US refining capacity. These are the main problems for the market,” Ahmad said, citing the impact of Thursday’s London terror attacks on oil prices.
Ahmad said he sent a message to British Prime Minister Tony Blair to express OPEC’s deep sympathy and determination to “work in close cooperation with the consumers to stabilize the market and ensure supplies”. He stressed the need to resolve the lack of refining capacity in meeting market demand.
“This is something we have to solve. We discussed this issue ... with (US) President (George W.) Bush,” during official talks between Kuwait Prime Minister Sabah Al-Ahmad Al-Sabah and Bush. “Kuwait is ready to build any refinery in the United States if we have a good situation with an international oil company,” he said.
“The London bombings are unlikely to cause as deep a disruption in oil demand. They occur against the backdrop of a UK and global economy that remain strong,” said Antoine Halff, director of Eurasia Group’s Global Energy practice.
Economists say that while oil prices have helped trim world gross domestic product growth from last year’s unusually strong 5.1 percent increase, there is no sign yet of a slowdown.
A Reuters poll of 22 strategists at major banks, released yesterday, projected a median for world growth in 2005 of 4 percent, slightly higher than a similar poll in January. “It is slowing compared to last year, which was an exceptionally strong year, but ... it’s like a soft landing,” said Jose Alzola at Citigroup in London.