OPEC Could Over-Produce
If High Oil Prices Persist
But Ministers Say Formal Action
To Boost Production Is Less Likely
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
March 12, 2005 7:31 p.m.
KUWAIT CITY -- OPEC officials said the oil-producing group will maintain its production ceiling when it meets on March 16, but its president hinted that it could over-produce to try to dampen near-record crude oil prices.
Sheik Ahmed Fahad al Sabah Sheik Ahmed, president of the Organization of Petroleum Exporting Countries, said he doesn't see any shortage of oil in the market, currently, but said that OPEC may react to help bring down high prices that flirted with record all-time highs last week, settling Friday at $54.43 a barrel in the U.S.
"I think if prices continue like they are, OPEC will behave like it did in 2004 and make sure we do something to stabilize the prices," he said. Last year, OPEC continuously produced over its self-imposed ceiling to try to dampen red-hot prices. Asked whether OPEC would produce above quota to rein in prices, Sheik Ahmed would only say the producer group would examine its exact spare capacity, as well as the real level of market demand.
Sheik Ahmed, who is Kuwait's oil minister, also said OPEC would have to be careful about any increase to the group's 27 million barrels-a-day output ceiling. He noted concerns among some OPEC members about hiking the ceiling in the spring, when demand traditionally drops off, as well as questions over how much spare capacity OPEC has to deliver new oil to the market.
"For that, we have to be very careful about increasing production, but the least we can do is to continue with the same ceiling," he told reporters at the parliament building in Kuwait City. Ministers from the major oil producers will meet in Isfahan, Iran, on March 16.
The minister said prices of up to $40 a barrel for the OPEC basket price were acceptable, but that OPEC no longer has a target price since dropping its $22 to $28 price band mechanism.
Sheik Ahmed said maintaining market stability was the responsibility of both OPEC and non-OPEC members. He said the producer group had contacted non-OPEC producers about forging cooperation over high oil prices. "If they have the capacity and the market needs more, I think we will discuss with them about increasing their production," he said.
Both the oil ministers of Venezuela and Algeria also said Saturday that world oil prices will likely remain at current levels for some time. Algeria's minister for energy and mines, Chakib Khalil, said Saturday that oil prices are high because of world economic growth -- particularly in the U.S. and China.
"OPEC has reached its production limits. It doesn't have much production capacity," he said at the opening of an industrial plant in the western town of Arzew. "If it came to a crunch, it has capacity for one million barrels (more per day), and I don't think a production increase would influence the barrel price."
Rafael Ramirez, Venezuela's oil minister, said Saturday during his three-day visit of Iran said, "There's a bit of an increase (in oil prices) and a bit of speculation but that has nothing to do with market fundamentals."
The minister dismissed talk that high oil prices could at some point hurt the growth of the world's economies, and said Venezuela will support a motion at OPEC's meeting to keep production unchanged. "The world economy hasn't been hurt at all by oil prices," Mr. Ramirez said. "On the contrary, there's a sustainable growth in Asia and in the United States." |
