CAIRO, 12 December 2004 — Oil prices will rise next week, Minister of Petroleum and Mineral Resources Ali Al-Naimi predicted yesterday, playing down the significance of a sharp fall the day earlier when the OPEC group tried to bolster prices by cutting output. “Watch what happens tomorrow,” he said, adding: “I will tell you, it will go up tomorrow.”
World crude oil prices plummeted Friday as traders cast aside news of a modest OPEC production cut, betting that prices are now far too high as energy stockpiles expand.
New York’s main oil contract, light sweet crude for delivery in January, plunged $1.82 to $40.71 a barrel, the lowest finish since July 21. Brent North Sea crude slumped $2.29 to $37.38. But Naimi expressed confidence that OPEC’s move would have the intended impact, saying that prices had dropped following the announcement of the organizations decision because of speculation on the market. “If you have been watching the market, that’s what they do, they take profit, they short the market on Friday and they long it tomorrow,” he said.
Echoing Naimi’s comments, Kuwaiti Energy Minister Sheikh Ahmad Fahd Al-Sabah said of the drop in oil prices: “We were expecting this kind of reaction”. “Monday I think when the members start to cut their production the market will be more stable,” he added.
However, he said that if crude prices keep falling OPEC should pare back its oil production ceiling at its next meeting on Jan. 30. “If the price behavior continues as it is now or yesterday (Friday) from now to January, I think in January we’ll have to cut the ceiling this time for about between 500,000 to a million,” bpd, he told journalists.
Qatar’s Energy Minister, Abdullah bin Hamad Al-Attiyah, said he was optimistic that the cuts would have the desired effect. “I’m confident that our decision will be implemented by January 1. We will see that there will be a draw of more than one million barrels (of supply) off the market. Hopefully it (the market) will react positively,” he said.
He agreed that a cut in quotas was possible at January’s meeting. “We will meet and if we need it we will do it. I’m always worried about the second quarter. This is why we decided to meet at the end of the month.”
Analysts shrugged off OPEC’s decision and were skeptical that it would have much impact on the market. Analyst Jamal Qureshi at the Washington-based consultancy PFC Energy said here: “I think this was pretty much the middle of the road decision. They’re not cutting back too much.”
Meanwhile, exports from Iraq’s northern oil fields resumed yesterday after insurgents last month blew up part of the main pipeline carrying Iraqi crude to Turkey, an official from the state-run Northern Oil Co. said.
An official for the company, speaking on condition of anonymity, said 500,000 barrels of crude will be pumped daily from oil fields in northern Iraqi to Turkish port of Ceyhan.
“Pumping started today and we will try to increase exports if no sabotage happens,” he said. On Nov. 15, saboteurs blew up the pipeline, which connects the Kirkuk oil field with Ceyhan.
The attack, in the Safra area, 40 miles southwest of Kirkuk, shut down Iraqi oil exports from the north. Insurgents also set fire to a storage and pumping station.
The exports pipeline runs from Kirkuk, going south to Beiji before connecting to a storage station called IT1, near the city of Mosul. The attack in November occurred between Kirkuk and Beiji.
Iraq was pumping an average of 400,000 barrels of crude a day through Turkey before a series of sabotages in early November.
Insurgents have repeatedly targeted the country’s crucial oil infrastructure in a bid to undermine the U.S.-backed interim government. The Oil Ministry said that between August and October, Iraq lost $7 billion in potential revenues due to sabotage against the country’s oil infrastructure.
