KUWAIT CITY, 3 April 2005 — OPEC President Ahmad Fahd Al-Sabah said yesterday the organization should start talks to consider pumping an additional 500,000 barrels per day (bpd) to calm soaring oil prices.
“(On Friday) prices rose again to record highs,” said Ahmed, who did not rule out the possibility of prices rising above $60 a barrel unless the market is assured of sufficient supplies. “We have to monitor the market for some time and restart our negotiations to consider increasing the (additional) 500,000 barrels,” he told reporters.
OPEC ministers in their last meeting on March 16 in Iran decided to raise output by 500,000 barrels per day, to 27.5 million bpd, and had promised to raise it again by a similar quantity if price levels remained steady. Organization members have entrusted the OPEC president to go ahead with the additional increase should they agree to it after consultations.
Talks between OPEC ministers on a second hike were abandoned earlier this week after oil prices eased slightly following better-than-expected US inventory figures. “I believe negotiations will continue. If they (OPEC members) agree, we will increase (production),” the minister said. “There will be increases for the third and fourth quarters ... Even if ministers do not approve an (immediate) increase, I believe an additional 500,000 bpd will be on the market in May ... for the third quarter,” he said.
OPEC members minus Iraq are currently producing some 28 million bpd, around half a million bpd above the official quota, Ahmad said. On returning from last month’s OPEC meeting, the minister said the organization would pump 28.5 million bpd in the third quarter and 30.3 million bpd in the fourth quarter to meet expected growth in global demand.
On Friday, London’s Brent North Sea crude oil for delivery in May surged $1.24 to $55.53 after peaking at $55.85, and jumping $2.20 to close at $54.29 the previous day. It remained close to a historic record of $56.15, reached on March 17.
New York’s main contract, light sweet crude for delivery in May, soared $1.25 to $56.65 per barrel in early deals, after closing up $1.41 on Thursday. World oil prices have now more than doubled since early 2002.
Asked if he thought oil prices would rise above $60 a barrel, Ahmad said: “I think so, unless markets are assured of enough crude supplies.” “A major part of this (hike) in prices is attributed to the psychological status of the market” and fears of supply shortages, he said.
Meanwhile, the West’s energy watchdog is set to advise oil importing countries that they should adopt emergency oil saving policies if global supplies fall by 1 million to 2 million barrels a day, the Financial Times said on Friday.
The International Energy Agency (IEA) will warn governments to set up “demand restraint policies” in the transport sector, such as driving bans or shorter working weeks, in a study to be released in May during an annual IEA meeting of energy ministers.
The FT said the figure of 1 million to 2 million barrels per day (bpd) was much lower than the official trigger of 7 percent of global supply — equivalent to 6 million bpd — agreed in the treaty when the agency was founded.
A fall of up to 2 million bpd would be the equivalent of the supply disruptions during the 2003 Iraq war or the 2002 oil industry strike in Venezuela. The Paris-based watchdog advises 26 industrialized nations on energy policy and was established after the oil crisis of the 1970s. The FT said the report, which has been circulated to member governments, recommended that demand restraint measures “may be attractive during extended periods of high oil prices to relieve demand pressure.” The IEA had previously confined such measures for times of crisis, the newspaper said.
Oil prices are up more than $12 a barrel, or almost 30 percent, since the end of last year, when prices jumped more than $10, or 34 percent.
The IEA forecasts world oil demand will grow 1.8 million bpd in 2005, or more than 2 percent, to 84.3 million bpd.
The IEA report entitled “Saving Oil in a Hurry” suggests dramatic measures, such as reducing motorway speed limits by 25 percent, shortening the working week, imposing driving bans on certain days, providing free public transport and promoting car pooling schemes. “A rapid (demand) response can send a strong market signal,” the FT quoted the report as saying. “A reduction in IEA transport fuel demand of even a few percent could have a substantial dampening effect on surging world oil prices,” the report said.
The proposals in the study could save up to 1 million bpd, the FT said, although the IEA acknowledged that some, such as car pooling or driving bans according to number plates, were difficult or costly.
