VIENNA, 30 March 2005 — Oil prices were steady yesterday as OPEC’s president announced that the group would not raise its formal output ceiling but said it would have to pump an additional 1 million barrels a day to meet strong demand.
The comments by Ahmed Fahd Al-Ahmed Al-Sabah, who is also the oil minister of Kuwait, reflected continued strong demand while sending signals that the Organization of Petroleum Exporting Countries no longer feared an immediate supply crunch.
“OPEC is signaling the market is less panicked and OPEC is less panicked,” said analyst Deborah White of SG Securities in Paris.
Light, sweet crude for May delivery was unchanged at $54.05 a barrel in early afternoon trading on the New York Mercantile Exchange. An intraday high of $57.60 was set March 17. Heating oil was down less than half a cent at $1.5435 a gallon. In London, Brent crude was down 64 cents at $53.29 on the International Petroleum Exchange.
OPEC agreed earlier this month to raise production quotas by 500,000 barrels per day and said it would consult on whether to increase them by a further 500,000 if prices continued to rise.
Al-Sabah, in Doha, Qatar, announced the suspension of talks on raising output limits. Still, he warned that demand could grow another 2.2 million barrels a day this year, reflecting not only the high demands of the summer driving season in the Northern Hemisphere but continuing world economic growth. Excluding Iraq — which is exempt from OPEC quotas as it rebuilds — OPEC will need to pump 28.5 million barrels a day in the summer, an increase of 1 million barrels a day from current output, he said.
And he cautioned that daily demand could rise as high as 33.3 million barrels in the peak winter months.
“Oil prices are unreasonably high because there is a worry that OPEC and non-OPEC (countries) can match demand,” he said.
Prices had been heading downward since US government data last week showed US inventories of crude oil at 309.3 million barrels, or 8 percent above year-ago levels, while gasoline supplies were at 217.3 million barrels, also 8 percent above year-ago levels.
Still, even before Al-Sabah’s comments, some analysts cautioned that the onset of the US summer driving season would probably keep prices high.
Meanwhile, traders were digesting news that China’s oil demand would expand by 10 percent this year, forcing it to devise new strategies to rely more on its own resources and less on volatile world markets.
Oil consumption was forecast to reach 354 million tons in 2005, making it imperative to reduce the dependence on imports, the China Petroleum and Chemical Industry Association said on its website yesterday. “China has the potential to ease its reliance on foreign energy as it has vast oil and gas reserves,” Tan Zhuzhou, the association’s president, said in a statement.
