LONDON, 18 March 2005 — Oil prices scaled fresh highs yesterday, forcing OPEC to consider a second output increase just a day after its deal to raise supplies failed to halt crude’s record-breaking advance.
US light crude set a record of $57.50 a barrel before easing by 1600 GMT to $56.70, up 24 cents on the day. London Brent crude, benchmark for European imports, hit a new high of $56.15 a barrel before easing to $55.30, a 47 cent gain.
OPEC President Sheikh Ahmad Fahd Al-Sabah said yesterday the group was prepared to pump more than 30 million barrels per day (bpd) in the fourth quarter — compared to their new quota of 27.5 million bpd — to meet growing demand.
“In the fourth quarter, about which world markets are concerned, OPEC will be required (to pump) 30.3 million bpd, according to our figures. OPEC can do that, and we will still have a small spare capacity,” said Sheikh Ahmad, who is Kuwait’s energy minister, on his return from an OPEC meeting in Iran.
He said he was referring to members of the 11-nation group minus Iraq.
OPEC ministers decided in the Iranian city of Isfahan on Wednesday to raise their oil production ceiling from 27 to 27.5 million bpd and consider a further increase in quotas if prices remain high in the coming months. “The market needs 27.5 million bpd in the second quarter, which is what OPEC will produce. In the third quarter, 28.5 million bpd will be needed, and the OPEC-10 have this capacity,” Sheikh Ahmad said.
Asked about the fact that prices continued to soar after Wednesday’s decision to pump more crude, he said the cartel would monitor the market for between seven and 10 days before starting contacts to decide on measures to be taken.
With output already near a 25-year high, OPEC is stretched to meet rising demand, encouraging the investment community to bet that oil’s bull run can go further.
Investors are diversifying into energy and commodities, driving US crude on average to $49.16 so far this year, up $7.70 from 2004’s average and $18 higher than the 2003 mean.
Rodrigo Rato, the head of the International Monetary Fund, said oil prices posed a risk, but that world economic growth still was expected to beat 4 percent in 2005.
“Oil demand has continued to be more income elastic than expected and less price elastic and for now there is no obvious dynamic in play to derail demand significantly,” said Paul Horsnell of Barclays Capital.
