KUWAIT CITY, 9 December 2005 — The Organization of Petroleum Exporting Countries (OPEC) is expected to leave output unchanged when it meets in Kuwait on Dec. 12 to decide production policy. President of the 11-member organization, Ahmed Fahed Al-Sabah, who is also Kuwait’s Energy Minister, along with members such as Iran and Nigeria, have repeatedly stated over recent days that they see no need for the group, which is pumping its maximum, to change production levels.
What is undecided however is whether the organization will extend a two million barrel-per-day (bpd) allocation of spare crude, which it offered to the market during its last meeting in September in Vienna.
The group offered the crude, the bulk of which would come from its biggest producer Saudi Arabia, in a bid to cool down prices that had soared to a record high of $70.85 per barrel in August.
Prices afterward dropped down to around the mid-$50-mark, a range which OPEC members called “reasonable”. But prices, as was expected, have since edged upward as this season’s cold weather began to hit northern hemisphere nations. “I have support to keep output unchanged,” Ahmed Fahed told reporters in Vienna on Dec. 2 during a meeting between OPEC and European Union members. “For at least our next meeting we will continue with the same size of our production. This is my opinion, and this is what, as president, I will propose to my colleagues,” he also said at the conference. Nigeria, Iran, and Indonesia have also called for no production changes.
OPEC left its official production quota of 28-million bpd unchanged at the September meeting. And according to the latest figures released Dec. 6 by the US government’s Energy Information Administration (EIA), members of the OPEC-10 nations, excluding Iraq which has no OPEC quota, produced 28.3-million bpd in November, the same as October.
Iraq increased its production by 50,000 bpd last month to 1.85-million bpd the EIA said, which would bring the 11 OPEC nations’ total current output to 30.15-million bpd.
Over the past months OPEC producers have been pumping at full tilt in order to build stocks in the United States, Europe, and Japan to prepare for winter demand, as well as to supply overall growing demand in Asia such as India and China.
Even with current ample inventories, the OPEC chief on Nov. 30 said the organization would be comfortable aiming for stock levels of 56 days of OECD forward demand cover by the end of the first quarter of 2006. End of September stock levels reached around 52 days of forward cover.
The organization’s largest producer and exporter, Saudi Arabia, recently said current crude inventories were at a “comfortable” level. Describing the market as “beautiful and in balance,” Minister of Petroleum and Mineral Resources Ali Al-Naimi told reporters in Kuwait on Nov. 28 he had no worries whatsoever that OPEC might not be able to keep pace with this winter’s demand, especially for light crude. “We have placed two million barrels on the table and it has not been picked up.
So that’s available in the market, if need be,” he said referring to the spare allocation offered in September. Some analysts are predicting that OPEC will roll-over the two-million bpd offer on Dec. 12, in a bid to keep prices stable.
New York’s main contract, light sweet crude for delivery in January, rose 59 cents to $59.80 per barrel in pit trading yesterday. In London, the price of Brent North Sea crude for January delivery gained 91 cents to $57.89 per barrel in electronic trading.