KUWAIT, 26 January 2005 — OPEC oil producers should keep output quotas unchanged when the group meets on Sunday as prices remain high and stocks are not building too fast, Kuwaiti Oil Minister Sheikh Ahmad Al-Fahd Al-Sabah said yesterday. “As Kuwait, I think we should maintain our ceiling at 27 million at this meeting,” the minister, who is also OPEC’s president, told reporters.
OPEC meets on Jan. 30 in Vienna. US crude prices held just below $49 a barrel yesterday after a weekend a blizzard enveloped the US Northeast, boosting demand for heating oil. Prices are a long way above the $35 level that the Kuwaiti minister said was OPEC’s preferred level.
“I think $35 was a price acceptable to everybody,” he said. OPEC’s reference crude basket was last valued at $42.49 a barrel. OPEC ministers have said this week that strong prices mean the group may be able to resist cutting output even though world supplies are running in excess of demand.
“No doubt the noticeable and renewed rise in prices is due to ... the cold snap in the United States and the second reason remains the worry about market supplies and the geopolitical problems especially in Iraq and the Gulf region,” he said.
The Organization of the Petroleum Exporting Countries is keen to avoid an excessive stock-build during the second quarter when demand ebbs after the northern winter. The group’s latest forecast projected that stronger-than-expected demand growth should help keep inventories under control. OPEC’s monthly report on Friday projected its current production levels will generate only a modest 1.4 million barrels per day increase in inventories. “Usually in the second quarter 1 million to 1.5 million I think is normal,” he said.
This is far smaller than huge second quarter builds forecast at this time last year, which spurred OPEC into surprise supply cuts. Those cuts helped fire oil’s 34 percent rally during 2004 as Chinese and US demand growth outstripped expectations.
OPEC has already agreed to withdraw 1 million bpd of excess supply from Jan. 1 to bolster prices. The group’s oil supply fell 800,000 barrels per day in January to 29.6 million barrels per day, leading tanker tracking consultancy Petrologistics said in its preliminary estimate for the month.
Kuwait’s first and largest oil-gathering center was formally reopened yesterday, nearly three years after being damaged by a deadly explosion, boosting production capacity by some 300,000 barrels a day. The reopening “will boost Kuwait’s production capacity to 2.8 million barrels per day (bpd),” Farouk Al-Zanki, chairman of the Kuwait Oil Company, said at an official ceremony attended by Sheikh Ahmad.
The minister said the center, in the northern Al-Rawdhatain oilfield, was rebuilt at a cost of around $300 million, most of it paid by the insurance company. The emirate’s current output capacity is 2.5 million bpd but it is producing 2.3 million. Its OPEC quota is just under two million bpd.
The center, which has a maximum capacity of 380,000 bpd, was rehabilitated by two foreign companies, South Korea’s SK Engineering and Construction and the United States’ Flour Daniels, in cooperation with KOC. The gathering center is currently producing less than 100,000 bpd but will be fully operational in April when a gas booster station is completed to handle large quantities of associated natural gas, the minister said.
“Reopening the center will enable us to distribute production at various oilfields and ensure sustainable production,” Sheikh Ahmad added. The facility, together with other ongoing projects, will restore output capacity of the emirate’s northern oilfields to 650,000 bpd, KOC said in a statement.
The increase in output capacity will boost Kuwait’s bid to increase its OPEC production quota in the future, Sheikh Ahmad said. The Gulf Arab state, which sits on 10 percent of the world’s proven oil reserves, depends on oil revenues for more than 90 percent of its income. Officials, diplomats and representatives of foreign oil companies in Kuwait attended the ceremony at the center, located some 100 kilometers north of Kuwait City. The center was partly destroyed during the 1990-91 Iraqi occupation of Kuwait and was first rehabilitated in January 1993.
