GYEONGJU, South Korea, 20 October 2005 — A top Organization of Petroleum Exporting Countries official said yesterday that OPEC was expected to increase its production capacity by 5.5 million barrels per day by the year 2009.
OPEC Secretary General Adnan Shihab-Eldin made the remarks at a meeting of the 21-member Asia-Pacific Economic Cooperation (APEC) forum on energy and mining in this southeastern city. “Combined with a plan to increase production from OPEC from 32.5 million barrels a day to 38 million barrels a day by the year 2009 and an additional 1.5 million barrels a day of National Gas Liquids coming also from OPEC over the same period ... accumulative world oil production capacity (including non-OPEC countries) will rise by around 12 million barrels a day over that period,” he said.
“This will be, in our opinion, above the expected cumulative rise in demand over that period which is estimated at to be around seven to eight million barrels a day. “This will be more than enough to cover the forecast growth in demand,” he added.
OPEC said on Monday that its 11 members, which jointly supply more than a third of global oil, had produced 30.34 million bpd on average during September, an increase of 130,000 bpd from August.
Noting a decline in production growth in non-OPEC countries, OPEC said these producers, led by Russia, would produce an average 50.3 million bpd this year, slightly less than a previous estimate of 50.4 million bpd.
Asked to comment on the outlook of oil prices, he said prices would moderate from the current high level. “For the short term, I’m not seeing prices go below $40 a barrel but I’m seeing prices could moderate below the current 70 or 60 level ... perhaps to go down to the 50,” he said. “Where the prices will come under pressure is not from the supply (side) of crude ... they will come under pressure because of downstream problems and shortages,” he said at a press conference.
Following his meeting with his South Korean host, Shihab-Eldin urged oil consuming countries to expand refining facilities quickly to fight high energy prices. He stressed there is spare crude available to be turned into products.
OPEC would continue making efforts to reassure the market that crude is always available, he said, adding that high oil prices were not justified in light of economic fundamentals.
“It’s very clear that currently, the market is well supplied with crude but the problem is that we don’t have a refining system that can take all of the crude that is available,” Shihab-Eldin told reporters.
“So that’s where the effort has to go - to building those refineries quickly, upgrading refineries and building the refineries that can take the spare crude and turn it into products that are much needed. That would lower prices,” he said. “We are continuing to work ... to reassure (the) market that there is no shortage of crude,” he added.
He also brushed aside allegations that high oil prices are a main drain on the global economy.
“High oil has yet affected the economic growth,” he said, noting the International Monetary Fund predicted a 4.3 percent growth for the world economy this year and four percent next year. He said the global economy has become “resilient” to high oil prices.
In nominal terms, prices are hovering above record levels but in real terms, they are “well below” the levels of the 1980s. “And for each unit of economic output, we use half the energy unit we used to use previously,” he added.
Meanwhile, world oil prices sank yesterday on news of a surprise jump in US gasoline and crude reserves last week, while Hurricane Wilma looked set to avoid storm-weary Gulf Coast installations, dealers said.
New York’s main contract, light sweet crude for delivery in November, plunged $1.60 to $61.60 per barrel in pit trading. In London, the price of Brent North Sea crude for December delivery shed $1.50 to $57.78 per barrel in electronic deals.
Traders were digesting the latest snapshot from the US Department of Energy, which showed that crude stocks surged over the past week as more supplies came online following recent hurricanes Katrina and Rita.
The DoE said crude stocks rose 5.6 million barrels in the week to October 14, almost three times more than forecasts of a 2.0-million-barrel increase. Gasoline reserves gained 2.77 million barrels, compared with market predictions of a 1.2-million-barrel decrease. Most analysts had expected a decline as a result of the refinery shutdowns in the US Gulf of Mexico.
Distillates, used for heating oil and diesel fuel, showed a decline of 1.9 million barrels, more than analysts’ forecasts of a decrease of 1.7 million.
