DJN: DJ Oil Inventories Need 1.5M-2M B/d OPEC Boost -Analyst
DJN: DJ Oil Inventories Need 1.5M-2M B/d OPEC Boost -Analyst
WASHINGTON (Dow Jones)--World oil inventories need an increase in
Organization of Petroleum Exporting Countries supply of 1.5 million to 2.0
million barrels a day to rebound to normal levels, a senior oil market
analyst said Friday.
"My belief is that this is either going to be done officially at the March
27 (OPEC ministerial) meeting - or in "gray market" cheating by some of the
countries that can add production such as Saudi Arabia, Kuwait and the
U.A.E.," according to Adam Sieminski, Baltimore-based director and energy
strategist for investment bank DB Alex.Brown.
The extra supply would have to come on top of existing OPEC quotas and the
additional amount the cartel already supplies by not fully complying with
those quotas, Sieminski said in testimony to a Senate hearing.
OPEC's quota compliance is now about 70%, reflecting an 850,000 b/d increase
from the 90% compliance level estimated a few months ago, he said.
A continuance of current OPEC production levels throughout the year is not
"workable" because it implies a physically impossible draw on world
inventories of 1.7 million barrels a day, or more than 600 million barrels,
he said.
But Sieminski said disproportionate spare production capacity among OPEC
members makes it politically difficult to raise output in the timely and
sizable manner needed.
"While Saudi Arabia accounts for 50% of total OPEC spare production capacity
of 5 million b/d, followed by Kuwait at 15%, other countries would struggle
to satisfy even a small quota increase spread evenly across the cartel above
current production levels," he said.
OPEC is likely to opt for incremental increases through the year - raising
the possibility supply will remain inadequate during the second quarter,
when stocks normally build ahead of the summer driving season in the
Northern Hemisphere, Sieminski said.
He projects the price of the benchmark crude grade West Texas Intermediate
will drop to $20-$22 a barrel but may take until in the second half of 2000
to do so. WTI crude oil was trading at $28.00-$28.05 Friday.
-By Campion Walsh, Dow Jones Newswires;
1-202-862-9291
(END) DOW JONES NEWS 03-24-00
02:35 PM
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