KUWAIT, 5 December 2004 — Kuwait’s oil minister said yesterday that OPEC members should cut all production above their official quotas if the current fall in oil prices continued.
“For our part as Kuwait, if this slide will continue as has happened in the last 48 hours, I think we have to comply to our production and to cut all overproduction,” Sheikh Ahmad Al-Fahd Al-Sabah told reporters on the sidelines of an energy symposium. “Until now, I think the market is oversupplied,” he added.
“Of course we are worried now we have to take this price (slide) very seriously. Next week at the OPEC meeting I think we have to study the situation to know if there is still a shortage in the market. If not, I think OPEC should work as always as much as it can for the stability of the market,” he said.
Asked about overproduction figures, he said, “I think there is 1.5 million to 2 million (barrels per day) in the market. For that we have to at least stay in the ceiling of the share of OPEC.”
“We are worried about the second quarter of next year. For that we have to make sure there is no overproduction,” he said, adding that he believed OPEC member states were producing at least 30 million bpd.
Asked what would be a fair price for oil, Sheikh Ahmad said at least $32 to $35 “will be the acceptable price for everybody...this will be acceptable for the consumer and the producer.” Oil prices have fallen about $7 a barrel for US crude in some three days, partly on the view that OPEC crude supplies are high enough for a counter-seasonal build in world crude inventories this winter.
The 10 members of the Organization of Petroleum Exporting Countries (OPEC) bound by quotas pumped 27.89 million barrels per day in October, 890,000 barrels above new official limits beginning Nov 1, a Reuters survey found.
“Kuwait is now waiting and observing. If there is no shortage, we don’t necessarily have to pump (more). Rather, we should go back to our production ceiling.”
Meanwhile, a senior OPEC delegate said in London on Friday OPEC cannot rule out cutting oil production if oil prices slide further before the producer group meets next Friday. “If you see the slide continuing we may have to take some action,” said the delegate.
“We will need to be sure that the price is falling because of fundamentals and we will need to be sure of forecasts that there is oversupply.” The alternative could be to eliminate leakage above existing quota limits,” the delegate said.
OPEC meets on Dec. 10 in Cairo to set policy for the first quarter of 2005.
Iran also yesterday reiterated its call for OPEC to pull supply back down to official quota levels and mapped out a way to fund a long-promised production hike, a newspaper reported.
Iran’s OPEC Governor Hossein Kazempour Ardebili had told Reuters on Monday that the organization should mop up oversupply because global markets were awash with some two million barrels per day (bpd) of crude beyond demand. “OPEC members should go back to quota levels,” he told the Sharq daily in an interview, when asked what course Iran advocated for the Dec. 10 meeting.
Kazempour gave the newspaper some details of how Iran would fund its attempts to double output to eight million bpd by 2020.
He proposed tapping the Oil Stabilization Fund, which is brimming over with oil revenues in excess of what was budgeted.
“I propose a withdrawal of $12 billion from the Oil Stabilization Fund to increase Iran’s oil production by 1.5 million bpd,” he said.
Kazempour said the withdrawals should be made over three or four years.
Iran’s nearer-term target is five million bpd by 2010.
Iran has the world’s second largest crude reserves, more than 130 billion barrels, and is looking to preserve its share of the OPEC cake as Iraq’s copious flow of crude is integrated back into the organization.
