Saudi urges decision on OPEC ceiling
Thursday, December 4 2003 - 02:06 AM WIB
Saudi Arabia is the first of the group?s 11 members to say that it may take a decision on changing its five-week-old production ceiling of 24.5 million barrels per day (bpd) today.
So far Algeria, Indonesia, Iran, Libya, the United Arab Emirates and Venezuela have argued to keep the status quo though they stressed fears for demand in the second quarter of 2004 and a need to meet again early next year to assess the market. ?I don?t think there is a need for a change in quotas ... we probably have to meet again before March,? Libyan Oil Minister Abdulhafid Zlitni said.
United Arab Emirates Oil Minister Obeid ibn Saif Al-Nasseri agreed. ?We don?t have strong reasons for changing the ceiling,? he told reporters, but added that the ?second quarter is a big concern? for OPEC.
Naimi said earlier that oil prices were ?OK? and the market was in balance, but there was a strong possibility of a cut in production in early 2004. ?The current prices are right. The dollar is weakening, the purchasing power is quite weak, so the price is OK. The market is in balance now, we have to be very careful what happens in the next few months,? Naimi said.
Asked whether there could be a production cut early next year, he replied: ?Yes, there is a high possibility? before signaling to reporters later in the day that such a cut may already be decided here today.
The current ceiling, the result of a surprise cut of 900,000 barrels per day, was decided in September and implemented on Nov. 1. Prices have since June stayed close to the upper limit of the $22-28 per barrel price band targeted by OPEC, and often hovered above it.
?Effectively this would mean OPEC is raising the target price for its oil,? said consultant Roger Diwan of Washington?s PFC Energy. All international oil trade is dollar-denominated. OPEC since 2000 has targeted a $22-$28 band for an index of its crudes, insisting its central target was $25 a barrel. The index, worth about a $2 discount to US light crude, was valued at $28.47 a barrel on Tuesday.
Despite the currency concerns, most in OPEC said they see no immediate requirement to follow up on September?s shock agreement to slash output.
OPEC members have blamed the high prices on political worries, mainly linked to Iraq, and not to low supply, while Naimi yesterday implied that the weak dollar also inflated prices.
A decision today to maintain or cut output would run against the wishes of the International Energy Agency, which represents consumer nations and has been calling for an increase in supply.
Algeria has said OPEC should contemplate lower production only in the second quarter, as seasonal demand decreases and output from oil producing countries from outside the cartel is expected to rise.
Algerian Energy Minister Chakib Khelil expected demand in the second quarter to be lower by 1.5 million bpd from its current level, and non-OPEC crude oil production to increase by more than one million bpd.
But he stopped short of predicting an OPEC cut in production in the second quarter. ?I don?t know, we should see how much we are producing first,? he said here.
Oil prices yesterday held on to the bulk of recent gains despite word from Vienna that OPEC members were set against an immediate reduction in quotas.
The price of reference Brent North Sea crude oil for January delivery was down seven cents at $28.87 per barrel in morning trade in London. New York?s reference light sweet crude January contract dropped 10 cents to 30.68 dollars in out-of-hours electronic deals. OPEC, which controls about one-third of the world?s crude oil supply, was expected to focus strongly on the situation in Iraq here today.
On the administrative front, the group was due to select a new secretary-general but members appeared far away from agreement on a name.
Iran, Kuwait and Venezuela have fielded candidates, respectively, Hadi Nejad Hosseini; Adnan Shihab-Eldin, who is OPEC?s director of research; and Alvaro Silva Calderon, the incumbent secretary-general. Iran has said it would stand by its candidate and not give support for any other country?s aspirant. Industry sources said if the cartel fails to reach a consensus, it could resort to alphabetical order, and in this case Iran would emerge as winner.(*)