OPEC President: Possible price slump puts focus on cuts
www.vheadline.com Posted: Wednesday, March 12, 2003 By: PETROLEUMWORLD
OPEC President Abdullah bin Hamad Al Attiyah said Wednesday the group's focus is now on a cut in crude oil output because he is afraid of a collapse in prices.
"What I'm afraid of in coming months with more oil in the market...is how will OPEC manage to avoid a (price) shock," he told Dow Jones Newswires.
At their output policy meeting Tuesday, oil ministers reassured markets they will pump more oil if there's demand. But many are skeptical about how much crude the Organization of Petroleum Exporting Countries and its de-facto leader Saudi Arabia can or want to pump.
OPEC, excluding Iraq, kept their current production ceiling of 24.5 million barrels a day intact.
Looming large are a US-led war against Iraq and a seasonal, second-quarter downturn in crude consumption in the Northern Hemisphere. Oil ministers will be tested BY trying to balance the two over the coming weeks.
"Now the concern is on what we'll do to cut production," Al Attiyah said.
This question was "more realistic and pragmatic" to answer than the issue of spare capacity, Al Attiyah said.
Saudi Arabia's Oil Minister Ali Naimi said Tuesday that the size of a fall in demand may not be as much as expected: "Demand may be the same. Maybe people will be building inventories. We don't know."
The International Energy Agency monthly report Wednesday stick to its second-quarter demand forecasts. It also said high oil prices, tight stock and reduced spare capacity in OPEC has left the global oil market on a knife edge, with very little flexibility to respond to further supply disruptions.
The general strike in Venezuela and fears of war in Iraq have pushed up prices and combined to reduce Organization for Economic Cooperation and Development oil stocks in January to 50 days of forward cover from 55.5 days a year ago, the Paris-based IEA said.
"A further supply disruption would tax a system operating at close to capacity," the IEA report said.
February output from all 11 OPEC members increased by 1.5 million bpd from January to 27.16 million bpd.
OPEC-10 output, excluding Iraq, was also up 1.5 million bpd on the month at 24.67 million bpd.
Output from Saudi Arabia increased 330,000 bpd to an average of 8.85 million bpd in February as the OPEC kingpin boosted supplies to cover for a shortfall in Venezuelan crude.
The IEA estimated Saudi oil output was more than 9 million bpd in the past two weeks.
Wednesday, the Kuwait News Agency reported Kuwait had begun pumping crude at full capacity of 2.4 million bpd. Kuwait's OPEC quota is 1.965 million bpd.
KUNA quoted a Kuwaiti oil official as saying the country won't close any oilfields if there's a war in Iraq.
At Tuesday's meeting, OPEC was anxious not to assume a war against one of its members is inevitable. It scheduled its next meeting three months on June 11 in Qatar, but many OPEC sources say they think they'll meet sooner.
Saudi's Naimi said OPEC must hold an emergency meeting in the event a US-led war breaks out in Iraq, Arabic al-Hayat newspaper reported Wednesday. "If the war occurs, God forbid, then OPEC as a responsible organization must convene and look into the market situation," Naimi said.
The oil markets are unconvinced OPEC can or will pump significant volumes of extra oil into the market to calm prices. For that reason, markets are focused on international events and whether the US and the West's energy watchdog, the IEA, will release their massive reserves.
OPEC's basket of seven crude oils averaged $32.54 a barrel Tuesday, compared with $33.11/bbl Monday.
At 1411 GMT, European benchmark April Brent crude futures on London's International Petroleum Exchange were trading down 23 cents at $33.06/bbl, while April US light sweet crude trading on New York's Mercantile Exchange was down 39 cents at $36.33/bbl.
By Adam Smallman, Dow Jones Newswires; 44-20 7842-9262; adam.smallman@dowjones.com
(Selina Williams in London and Sally Jones in Vienna contributed to this article)