February 25, 2007	Sunday	Safar 7, 1428

RIYADH, Feb 24: Saudi Oil Minister Ali Naimi believes the crude market is now better balanced and if prices are maintained around the current levels, the Organisation of Petroleum Exporting Countries (Opec) will not make any adjustments to production levels at their forthcoming meeting next month.

Host of factors, from reduced Opec output to comparative cold weather in the northern hemisphere, drop in inventories in the major consuming economies plus the increasing confusion on the Iran nuclear issue contributed to the firming up of the oil market prices – from the lows of below $50 a barrel to around $60 mark.

The February Monthly Oil Report of the London-based Centre for Global Energy Studies (CGES) says the Opec’s 11 members, excluding Angola, have cut their aggregate oil production by nearly 1.5 million barrels per day (bpd) from the last year’s peak level of almost 30 million bpd.

Concurring with the Saudi oil minister, the CGES report emphasised: “Opec’s current level of production, estimated at slightly less than 30.1 million bpd in January, is below the expected call on its oil.

Unless Opec production is permitted to rise in the coming months, oil prices could once again set off in an upward direction as refiners chase scarce barrels to meet summer demand for transport fuels in North America.”

Some analysts were projecting about slower than expected growth of the US economy, reducing the expected demand from the world’s major consumer of oil. This, they said, could ease the situation.

The 10-Opec members bound by the output agreements produced an average 26.95 million barrels per day in January, down 50,000 bpd from December's 27 million bpd, but still well above the group's November 2006 and February 2007 targets, a Platts survey showed.

But with the second quarter looming, traditionally the weakest demand quarter, John Kingston, Platts global director of oil, cautions, "If Opec wants to defend current prices near $60 it may prove difficult to do if the group's production levels stay just under 27 million barrels per day.

The International Energy Agency (IEA), the Pari-based OECD energy watchdog, has in the meantime, also raised its 2007 world oil demand estimates. The IEA in its monthly report said: "Global oil product demand is raised by 111,000 barrels per day (bpd) in 2006 to 84.5 million bpd and by 273,000 bpd in 2007 to 86 million bpd following revisions to China."

Interesting to note is the fact that for the first time since 1985, oil demand in the 30 industrialised countries of the Organisation for Economic Cooperation and Development had shown a significant drop.

The IEA, however, underlined that in non-OECD countries demand has been robust, and that non-OECD oil product consumption was projected to grow by 3.6 per cent and 3.2 per cent in 2006 and 2007, respectively." That was in large part due to "Chinese apparent demand, which is now seen to reach 7.1 million barrels per day in 2006 and 7.6 million barrels per day in 2007."

On the supply front, the report said: "World oil supply grew by 175,000 bpd in January to 85.5 million bpd, with higher output in the former Soviet Union and other non-OECD producers." However, crude supply from Opec fell by 180,000 bpd in January from December to 30.2 million bpd. The IEA also revised the demand for Opec oil to "30.6 million bpd for 2007 versus 30.3 million bpd in 2006 and remains above existing Opec production," said the IEA's 52-page report.

The IEA warned that a production cut already programmed by Opec, if applied, would bring its output down to 25.8 million bpd from this month, a level that could see demand for Opec crude outstripping supply from member countries by the second quarter.

The peak $80 mark attained mid last year, is no where in sight at this moment and the markets would continue to be volatile, somewhere around 60 a barrel, in the short-to-medium term, analysts said.