Oil prices will not fall below $20: Analyst

Oil prices will not slump to below US$20 in the international market and the government?s fears in this matter are considered as excessive, says local oil expert.

With the appointment of Minister of Energy and Mineral Resources Purnomo Yusgiantoro as the next president of the Organization of Petroleum Exporting Countries (OPEC), the government must be confident that the oil prices will be in the range of the 2004 budget assumption of $21 per barrel, oil analyst Kurtubi told Kompas newspaper in Jakarta on Friday.

Purnomo will assume his new post on January 1, 2004.

The new OPEC president Purnomo must convince other member countries to keep the price at $25, Kurtubi said.

The empirical data for the last two years, according to Kurtubi, shows that the oil prices always remained above $25 per barrel. The market indicators for 2004 point out that the prices will remain strong.

While commenting on the Iraq?s plan to pump 3 million barrels per day (BPD) during 2004, he said it will not affect the world market, Because, Iraq?s entry into the world market came at a time when the oil demand was increasing.

?During the fourth quarter, it (global oil consumption) will be around 80 million BPD or an increase of 3 million BPD in compare to the third quarter of 2003. Therefore, the increasing demand will keep the price higher, he explained.

According to world oil analysts? estimate, the oil demand for the fourth quarter of 2003 will be surged to 80,1 million BPD from the third quarter?s 79.3 million BPD.

But Purnomo said on Sunday that there might be oil oversupply in OPEC in the first quarter 2004.

In order to meet this oversupply and maintain the price band of $22-$28 per barrel, the oil cartel announced an output cut of 900,000 BPD, to take effect at the beginning of November.

The duty of Purnomo, Kurtubi said, will be to stabilize the oil price and see that it will not be below the $22-$28 per barrel. (*)