NEW DELHI, 5 January 2005 — Saudi Arabia has enforced its pledge to cut 500,000 barrels a day of oil supply and is now producing around nine million barrels per day, Minister of Petroleum and Mineral Resources Ali Al-Naimi said yesterday. “We took off the 500, we’re around nine,” Naimi told Reuters in an interview on arrival for a meeting with Asian oil consumers in New Delhi.
OPEC oil producers last month agreed to cut one million barrels per day of excess supply from Jan. 1 in an effort to cap a forecast out-of-season build in stocks during the northern winter.
Top OPEC producer Saudi Arabia pledged to shoulder half the total cut, or 500,000 bpd. International oil majors confirmed that they received lower January supplies from state oil firm Saudi Aramco.
Oil prices have fallen nearly $14 or 25 percent from record highs hit on late October. Some OPEC ministers have said that the group may need to cut production quotas when it meets on Jan. 30 to stop prices falling further.
Naimi declined to be drawn on whether OPEC was likely to cut, saying that the group would first need to assess supply and demand trends. “We’ll have to look at the data,” he said. Oil prices rose 34 percent in 2004, driven up by rising consumption in China, India and the United States. OPEC pumped at its highest level in 25 years to meet the demand, leaving little capacity spare to cope with supply problems. Demand growth is expected to ease this year, but Naimi declined to speculate on whether oil prices would continue to fall. “Let’s leave that all up to the market” he said.
OPEC’s own reference basket of crude oil was last valued at $35.67 a barrel, still well above the formal $22-28 a barrel price target.
Meanwhile, oil prices rebounded yesterday after sliding 3 percent on Monday as forecasts of continued mild winter weather in the United States soothed concerns over low heating oil stocks.
US crude rose $1.18 to $43.30 a barrel after starting 2005 on Monday with a $1.33 drop due to continued mild weather in the key US Northeast, the world’s biggest regional consumer of heating oil.
London’s Brent crude dropped six cents to $40.08 a barrel. London’s International Petroleum Exchange was closed on Monday for a holiday.
Forecasters Meteorlogix predicted temperatures in the US Northeast to be above normal until Thursday and for near to above usual levels for the six-to-10-day basis.
A government report today is expected to show US distillates inventories, which include heating oil and diesel, rose a modest 160,000 barrels last week, according to an expanded Reuters poll. US heating oil futures shed 3 percent, or 3.75 cents on Monday to settle below $1.20 a gallon for the first time since Sept. 10. At 1740 GMT, heating oil was up 4.28 cents at $1.235 a gallon. “The weather is quite warm and sentiment is weak. But the weather can change in a single day and prices could easily turn upwards,” said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo.
“I don’t think people want to take the risk of volatile prices at the moment, we’ll probably stay in a $40 to $44 range,” said Emori.
In Nigeria, a company source for Royal Dutch/Shell said the company has ended a dispute with a Nigerian community and that 100,000 bpd of production that was halted during the dispute should resume flowing today.
About 145,000 bpd of crude output remains closed in the US Gulf of Mexico following September’s Hurricane Ivan, and two oilfields with a combined production of 205,000 bpd are still closed in the Norwegian North Sea after a gas leak in November.
