KUWAIT CITY, 5 September 2004 — OPEC is considering raising its price band to between $28 and $30 a barrel, Qatar’s energy minister said in comments published yesterday, ahead of a crucial meeting of the organization.
“A special committee is currently reviewing raising the band to between $28 and $30 a barrel,” from the current $22 to $28, Abdullah ibn Hamad Al-Attiyah told the London-based daily Al-Hayat.
“If the committee completes the revision, the issue could be discussed at the meeting,” of OPEC ministers due to be held in Vienna on Sept. 15, he added.
“The fair price is between $28 and $30. This price is fair to both consumers and producers and will help avoid fluctuations. The high prices of $40 a barrel are not appropriate for consumers or producers,” he said.
In London, the price of benchmark Brent North Sea crude oil for delivery in October fell 34 cents to $41.23 a barrel on Friday.
New York’s reference contract, light sweet crude for October delivery, dipped seven cents to $43.99 a barrel at the close on the New York Mercantile Exchange. Attiyah attributed the hike in oil prices over the past few weeks to “fears and psychological pressure,” adding that it was not related to supply and demand as almost all OPEC members had been producing to full capacity.
OPEC agreed at a previous meeting in June to raise its output ceiling by 2.5 million barrels a day in two stages in its effort to curb high world prices. A rise of two million barrels per day went into effect in July and another 500,000 on Aug. 1.
Meanwhile, the head of the International Energy Agency Claude Mandil said Friday that OPEC needs to reassure global oil markets when it next meets that it is taking steps to increase spare production capacity as a buffer to prevent future price shocks,.
“The most positive thing to come out of the meeting would be some strong declaration from key ministers that they recognize current spare capacity as too low and investment is needed,” Mandil told Dow Jones Newswires in a telephone interview.
Although oil prices have eased off the record highs seen in August, markets are still worried about potential supply disruptions while spare production capacity is so limited. “If OPEC spoke collectively this would be of interest, as the main reason why the market is jittery is because it’s aware that there are no real buffers,” Mandil added.
The Organization of Petroleum Exporting Countries is currently producing around 30 million barrels a day — a level not far off its maximum output.
Some OPEC delegates have indicated that the production ceiling could be raised another 1 million-2 million bpd from the current 26 million bpd to legitimize current overproduction when the group next meets in Vienna.
In its last monthly report, the Paris-based energy watchdog said OPEC’s spare capacity was “thin” and estimated total spare capacity in July at around 1.2 million bpd.
However, in the short term the group could add up to 2 million bpd of surge capacity.
Mandil said that, with the new capacity coming onstream, OPEC should be able to meet expected demand for its crude oil in the fourth quarter of this year of 28.4 million bpd. “I expect OPEC will meet the demand provided there are no unexpected events,” Mandil said.
Mandil reiterated that strategic petroleum reserves held by members of the Organization for Economic Cooperation and Development would only be used in the event of a complete disruption. “We don’t have any specific event in mind, but it would only be used if there was a supply disruption which couldn’t be met by other producers,” he said.
