Surplus oil drives world prices down
Nigel Wilson, Energy writer
September 08, 2004
WORLD oil prices are weakening after OPEC president Purnomo Yusgiantoro said the organisation might have spare capacity of more than 1.5 million barrels a day.
Speaking in Sydney yesterday, he said OPEC's forecasts showed the world market had enough oil and production capability was 1.5 million barrels above demand.
Dr Purnomo, having predicted that crude oil prices could fall as low as $US30 a barrel once political uncertainty in the Middle East, Russia and the US ended, declined to indicate how high oil prices had to go before they affected international economic growth.
"That all depends on demand," he told reporters.
"At $US45 to $US50, the world is still okay, but money is strong so far ... and the world does not hurt much," Dr Purnomo said, noting the international crude oil price was in decline.
Crude oil for October delivery fell as much as $US1.02, or 2.3 per cent, to $US42.97 a barrel, in electronic trading on the New York Mercantile Exchange yesterday. Analysts said the market was responding to reports that Saudi Arabia was cutting prices for oil sold to European buyers.
They expected prices to fall further after the OPEC chief's remarks.
Dr Purnomo, who is also Indonesia's oil minister, is in Sydney attending the World Energy Congress.
Yesterday, he declined to comment on whether OPEC's ministerial meeting in Vienna next week would decide to cut production now that prices were falling.
"We are about to finish the driving season (in the US) but we are entering the winter season (in the northern hemisphere) so this has to come into our calculations."
Dr Purnomo said OPEC's current production was 30 million barrels a day, which included 2 million barrels more than its nominal quota of 26 millionbpd and a further 2millionbpd from Iraq that could be affected by terrorism.
He said OPEC members, including Iraq, could continue to produce between 29million and 30 millionbpd indefinitely.
OPEC's Vienna meeting will also hear a report on pricing activity -- recent speculation suggests daily production levels might be reduced now that prices have fallen from last month's record of nearly $US50 a barrel.
Analysts said the price decline could mean demand for oil is waning.
Phil Aiken, the head of BHP Billiton Petroleum, Australia's biggest oil producer, earlier forecast that crude oil prices would decline to an average of around $US30 a barrel, without defining a time frame.
Mr Aiken, speaking outside the conference, said there was a consensus in the industry that current prices were unsustainable and that they would decline over time. |
