OPEC moves to hike quota
www.vanguardngr.com
Monday, January 13, 2003
VIENNA — UNITED Arab Emirates Oil Minister, Obeid bin Saif al-Nasseri said, Saturday that OPEC was discussing a production hike of around one million barrels per day (BPD) to stop prices rising due to a six-week-old strike in Venezuela and the threat of a US-led war against Iraq. “Obviously there is a shortage, but we have to see what quantity it requires. We have to discuss it to see if it is one million more or less,” he said upon arriving in Vienna for an extraordinary meeting, Sunday of the Organisation of Petroleum Exporting Countries (OPEC). Saudi Oil Minister, Ali al-Nuaimi said OPEC would move to prevent oil shortages. “I can tell you I support making sure the market is well balanced. There will be no shortage of supply in the market when the market is well balanced,” he said. Al-Nuaimi refused to give figures for what is expected to be an increase of one to two million barrels per day (BPD) in oil production, with the strike in Venezuela keeping some two million barrels BPD off the world market, and hitting the United States particularly hard.
OPEC President, Qatar Oil Minister, Abdullah bin Hamad al-Attiyah said all options are still open as OPEC ministers get ready to meet. OPEC member, Venezuela accounts for around 13 per cent of US oil imports. The strike there has caused US oil stocks to fall at a time when Washington needs them to increase as it prepares for a possible war on Iraq. If the United States launches a war in Iraq before the Venezuelan strike ends, markets could be deprived of about five million barrels of crude oil per day, or even more if the war were to destabilise other Middle East producers.
“Five million barrels a day is a significant shortfall ... There are severe disruptions out there,” said Washington-based analyst, Raad Alkadiri of the PFC Energy consulting firm. “There certainly is a crisis, a crisis OPEC is responding to,” he said. He said the Saudis wanted to show “they can be relied on to provide stability in the market.” But he said the United States may still be forced to dip into its 600-million-barrel strategic oil reserve to make up for shortfalls.
OPEC increased its combined output ceiling by 1.3 million BPD to 23 million BPD excluding Iraq on January 1, together with a pledge to cut actual production to try to restore credibility in the face of chronic quota busting. A source at the cartel’s Vienna headquarters said that any rise in OPEC production quotas would take effect on February 1 at the earliest, and would probably be rolled back once exports recovered in troubled Venezuela. OPEC’s oil supply is estimated at 75 million BPD. Eight of its 11 members are Arab or Middle Eastern: Algeria, Iran, Iraq, Libya, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates. The others are Indonesia, Nigeria and Venezuela. The cartel has a target price band of $22 to $28 per barrel.
OPEC, which produces about one-third of the world’s crude oil, agreed to meet for the second time in a month after oil prices roared above $30 per barrel in London and New York. A “compromise” agreement on the table here is for an output increase of around one million BPD, with Saudi Arabia pushing for a bigger hike, the Middle East Economic Survey (MEES) reported in its edition to appear Monday, monitored in Nicosia.
“In telephone consultations ahead of the Vienna meeting, Saudi Arabia has pushed for a substantial increase in the ceiling, but has faced opposition,” the industry news letter said, adding that spare OPEC production capacity is now mainly limited to Riyadh and the United Arab Emirates. Indonesia, Iraq, Kuwait and Iran will not be sending their ministers to the hastily called OPEC meeting, although they will still be represented. Analysts said some countries may be staying away since they have no excess capacity to offer.