Opec expected to raise output, push for more refining
PARIS, Sept 17: Top Opec ministers begin gathering on Saturday for a meeting at which they could increase official crude oil output, though analysts and the officials themselves say the reasons for high oil prices lie elsewhere.
Among the principle figures expected to arrive first in Vienna were Opec president Sheikh Ahmad Fahd al-Sabah of Kuwait and Saudi Arabian Oil Minister Ali al-Nuaimi, whose country pledged Thursday to help curb prices.
They have already begun to ease somewhat from an all-time record of 70.85 dollars per barrel reached in New York in late August, and dropped further on Friday to $63 a barrel for light sweet crude in New York and to $62.21 a barrel for Brent North Sea crude in London.
Prince Sultan bin Abdul Aziz of Saudi Arabia, the world’s biggest oil exporter, had sought to ease fears of an economic shock for developed countries and the anger of drivers feeling the pinch at the gasoline (petrol) pump.
While expressing our concern about the rise in oil prices, we affirm our readiness to do all that we can to compensate shortage in supplies and meet increase in demand, the Saudi prince said Thursday.
A spokesman for the Opec, which supplies about 40 per cent of the world’s oil, underlined that a similar offer had been made by Sheikh Ahmad of Kuwait.
One option is, as the president has proposed, to increase the official ceiling by another 500,000 barrels which would see real oil coming into the market, Abdulrahman al-Kheraigi told AFP.
The 11 Opec ministers scheduled to attend the meeting on Monday and Tuesday appeared set to approve a new official quota of 28.5 million barrels per day (bpd), but analysts said it would amount to a symbolic gesture for several reasons.
First, Opec is already producing more than its current official quota of 28 million bpd and most members were believed to be pumping crude oil at near full capacity.
On September 4, Sheikh Ahmad told the official Kuwaiti news agency KUNA: Opec is currently producing 30.4 million bpd ... This production is more than the market needs to allow the building of strategic and commercial stocks in order to stabilise prices.
Manouchehr Takin at the Centre for Global Energy Studies (CGES) agreed, saying in reference to the cartel: They continue to produce above quotas.
Secondly, the main reason regularly given for the rise in oil prices over the last few months is not a lack of crude oil, but of refining capacity.
That was underscored by devastation in the wake of Hurricane Katrina along the Gulf coast of the United States, a major refining region.
They will raise the ceiling but it is a symbolic gesture. In fact, the market cannot take the extra crude, said Deborah White, an analyst at Societe Generale. Everyone except Saudi Arabia is producing at full capacity.
Crude is not really the problem, it’s the refining, echoed Simon Wardell at economics consultancy Global Insight.
They (Opec ministers) will explain again that the problem is refining, White said.
And even amid the latest easing of prices, Opec lowered Thursday its estimate for global oil demand in 2005 for the fifth time in row, pointing to slower-than-expected economic growth in the United States and China.
There were also signs that reconstruction of oil production and refining installations on the US Gulf coast was progressing after the International Energy Agency said it would not release any more emergency oil stocks to compensate for the disruption.
Simon Wardell of Global Insight said an initial IEA decision on September 2 to release 60 million barrels of extra crude from strategic stocks had helped illustrate the lack of appetite for unrefined oil.
Of the 30 million barrels of crude released from the US strategic reserves, “they have only sold 11 million,” he said. There were 19 million barrels that no one wanted.
In France, Finance Minister Thierry Breton called on oil executives to provide assurances they would protect consumer interests by quickly cutting gasoline prices as the cost of crude oil decreased, which the French group Total immediately agreed to do. —AFP
