VIENNA, 30 January 2005 — OPEC oil producers are considering possible advance measures to head off a price drop after the northern winter, the group’s president said yesterday.
Talk in the Organization of the Petroleum Exporting Countries, meeting today, over the possibility of prearranged supply curbs appears to underline its determination to support high prices, now over $47 for US crude.
Several ministers have said they expect to stick with existing production limits for the moment. US oil futures fell $1.66 on Friday, closing at $47.15 a barrel after a number of OPEC nations said they expected to leave output quota limits unchanged today.
But OPEC President Sheikh Ahmad Al-Fahd Al-Sabah said some now feared the group’s next meeting in mid-March may be too late to adjust policy for the second quarter, when seasonal demand ebbs.
OPEC was considering plans to reduce supply if needed before the March 16 meeting in Iran to counter the decline in consumption, said Sheikh Ahmad, the oil minister for Kuwait.
“It looks like all the members until now are supporting the idea to continue with the oil production level without any cut,” he said.
“But because late March will be too late to cut for the second quarter there is a proposal to start some conversation between the ministers on when it will be needed from now to Isfahan.”
Delegates said it remained unclear how the trigger for implementing any pre-arranged cut might work, but it was likely to be linked to how the market played out over the next few weeks.
Concerns among OPEC nations about the detrimental impact of prices near $50 a barrel on world economic growth and fuel demand appear to have evaporated.
Saudi Oil Minister Ali Al-Naimi said yesterday that he believed the modern global economy was too large and strong to be blown off course by the price of oil.
Asked whether he thought $50 could be a barrier to growth, Naimi said: “Really it’s not, the world economy has grown so big that little fluctuations in oil are not doing so much.”
“There’s no question as you look at the growth, that the world has entered into a nice pattern of economic growth,” he added. “That’s why we are doing what we are doing,” he said, referring to Saudi Arabia’s plans to increase its production capacity in the coming years.
The Kingdom’s capacity, which is currently estimated at 11 million barrels per day, should reach 11.8 million bpd in 2007, Naimi said.
Naimi echoed comments from other ministers arriving in Vienna on Friday with both Sheikh Ahmad and Algerian Oil Minister Chakib Khelil also shrugging off the impact of high oil prices on the world economy.
World oil prices have risen sharply in recent weeks close to $50 a barrel amid concerns about attacks on Iraqi pipelines ahead of landmark elections and amid concerns over heating fuel demand on account of cold weather in some parts of the northern hemisphere.
Iranian Oil Minister Bijan Zanganeh said that while OPEC was unlikely to need to act quickly on supply now, some members were worried about a stockbuild.
“There are two groups — one believes that there is oversupply in the market ... another group believes another change in the OPEC ceiling can send the wrong signal,” he said.
OPEC agreed last month to bring production back into line with a formal 27 million barrels per day ceiling by withdrawing one million bpd of supply from Jan. 1.
OPEC economists estimate second quarter demand for cartel crude at 27.7 million bpd, implying a meager world stockbuild of 1.3 million bpd between April to June, the slackest annual period for demand.
