KUWAIT, 29 November 2005 — OPEC will pump enough oil to build up global stockpiles and cushion consumers in the United States, Europe and Japan from higher prices this winter, the producer group’s president said yesterday.
The Organization of Petroleum Exporting Countries has been producing nearly flat out at 30 million barrels per day (bpd) for months as it seeks to fill storage tanks and tame prices that roared above $70 in August. Swelling inventories have cut $13 off oil since then, but OPEC President Sheikh Ahmad Al-Fahd Al-Sabah, also Kuwaiti oil minister, said producers want stockpiles to rise higher still. “We are allowing the stocks to build as OPEC, since last year. We are trying to make stocks build even to 56 days (of forward demand cover),” Sheikh Ahmad told reporters. “For this is one of the points that we think will be very important to stabilize prices.”
OPEC previously described 56 days of forward demand cover as excessive. According to the International Energy Agency, forward demand cover from inventories held in OECD industrialized nations was 52 days in September so OPEC has some leeway.
But analysts said OPEC’s stock-piling plan, however well-intentioned, cannot relieve tightness in refined oil products such as heating oil and gasoline.
“All that goes out the window when there’s too much crude and not enough product,” said Deborah White, senior energy analyst at SG Commodities in Paris.
Top oil exporter Saudi Arabia said the group’s strategy to build inventories, adopted in March, was meeting success. “The market is beautiful, it is in balance and inventories are at a very comfortable level,” Saudi Minister of Petroluem and Mineral Resources Ali Al-Naimi told reporters at an energy conference in Kuwait.
“Supply is somewhat more than demand...and the prices have started to stabilize.”
Al-Naimi said it was too early to predict OPEC action at its meeting in Kuwait on Dec. 12, but said the group “will take a decision based on this comfortable situation.”
After a meeting of Gulf Arab oil ministers in Riyadh on Saturday, Al-Naimi said OPEC was not thinking of cutting output levels despite a recent fall in oil prices.
Sheikh Ahmad echoed Al-Naimi’s remarks. “It looks like that, until now, nobody is thinking of cutting production,” he said yesterday. “This is the most important (thing).”
In September, the group offered its spare output capacity, the lion’s share of which is held by Saudi Arabia, from Oct. 1 for three months to calm prices that roared past $70 in August. “We have put 2 million bpd on the table and it has not been picked up,” said Al-Naimi. “So that is available in the market if need be.”
United Arab Emirates’ Oil Minister Mohammed ibn Dhaen Al-Hamli said at the weekend that OPEC might continue with the offer if markets call for it.
But Qatari Oil Minister Abdullah Al-Attiyah said he saw no reason why the organization should extend it, citing large amounts of oil now in transit.
Meanwhile, oil prices dropped heavily in New York yesterday amid much smaller losses in London, as traders kept a close eye on weather conditions in the northern hemisphere.
In London, the price of Brent North Sea crude for January delivery fell 30 cents to $54.71 per barrel in electronic dealing. New York’s main contract, light sweet crude for delivery in January, dived $1.56 to $57.15 per barrel compared to Wednesday’s closing price.
