OPEC resists calls for increased oil output

Oct. 16, 2000
Despite current high oil prices and concerns over oil supply levels this winter, some members of the Organization of Petroleum Exporting Countries are resisting calls for an increase in the group's output.

Despite current high oil prices and concerns over oil supply levels this winter, some members of the Organization of Petroleum Exporting Countries are resisting calls for an increase in the group's output.

Instead, some officials have issued warnings about the prospect of an oversupplied market next year.

Iran's OPEC governor, Hossein Kazempour Ardebili, said last week that if the organization continues with its current level of oil production, the oil market would face an excess of oil supply in the second and third quarters of 2001.

And Qatari Minister of Energy and Industry Abdullah Bin Hamad Al Attiyah dismissed suggestions that OPEC might consider raising output levels to offset stubbornly high oil prices before its meeting in Vienna next month.

Meantime, Saudi Arabia continues to take a more moderate stance, expressing hope that the upcoming International Energy Forum in Riyadh would provide the impetus for progressive talks among high-level ministers from the oil producing states and consuming countries attending, according to OPEC's news agency OPECNA.

Iran's view

Last month, OPEC agreed to boost output by 800,000 b/d to 26.2 million b/d, as of Oct. 1, representing the group's third production increase in 2000.

But Ardebili said that if OPEC output remains at the current level, there would be a crude surplus of 2.3 million b/d and 3.3 million b/d in the April-June and July-September periods, respectively, next year.

He said that if demand for crude declines and OPEC neither trims its output nor abides by its quotas, the oil market would face renewed fluctuation.

Ardebili said the rise in crude demand in the oil market this year was estimated at 1.2 million b/d. Demand for OPEC crude had dropped by 400,000 b/d, while non-OPEC producers were pumping an extra 1.6 million b/d in the current year, he estimated.

He said OPEC had contributed to an increase in global stockbuilding rates by 2.1 million b/d in the second quarter of this year and by 2 million b/d in the third quarter.

Taking into account production by Iraq, which is not party to the OPEC agreement, the organization's output currently stands at 29.2 million b/d, with a 300,000 b/d contribution to global inventories.

Therefore, OPEC had contributed an increase, on average, of 1.1 million b/d to global inventories during this year, he explained.

Asked about the OPEC summit in Venezuela, Ardebili said it had been very successful (OGJ, Oct. 9, 2000, p. 30).

He noted that the summit's final declaration was very strong, and it served to ease the concerns of member states, adding that OPEC members would cooperate in the field of environmental protection.

Ardebili said they had also decided to hold regular OPEC summits.

Qatar's view

"Increasing production will not be the solution, and it will not benefit OPEC," Al Attiyah is reported to have said at a meeting in Doha, where he urged the European Union to solve the issue of high taxes imposed on oil products, according to OPECNA.

Al Attiyah stressed that European tax policies-and not OPEC-was the "main reason" for current high oil prices, adding that OPEC is prepared to study whether to increase production before the organization's Nov. 12 meeting.

"We do not want to hurry and take a hasty decision," he emphasized. "We still have enough time before the next meeting. If the market needs more oil, OPEC is ready to play its role. If prices fall, OPEC will intervene and reduce production," he explained.

Al Attiyah pointed to OPEC's meetings in 1998 in South Africa when, at a time that oil prices were low, "consumers told [OPEC] prices were subject to market forces, and [OPEC] should not interfere to strike a balance between demand and supply."

"Now, with prices on the boil, the same consumers are putting pressure on the market," Al Attiyah noted.

The Qatari minister emphasized that "OPEC is working hard for a stable market and stable supply to keep prices in the $22-28/bbl band." Al Attiyah also said that surplus supplies of oil may force OPEC to reduce its production in the second quarter of 2001.

Al Attiyah noted that international oil stocks are growing at a rate of 2 million b/d. "If this rate continues, oil prices could come under pressure in the second half of next year. We are closely monitoring the market situation," he said.

Saudi stance

A statement issued by Saudi Arabia's Ministry of Petroleum and Mineral Resources said the forum had as a main objective "to promote a better understanding of important international energy issues, strengthen the concept of partnership among energy producers and consumers, as well as identify the right links [among] energy, the environment, and economic development."

Sixty countries and international organizations are expected at the event, to be held in mid-November under the banner of "Energy Partnership for the New Century" and cohosted by the Netherlands and Japan.

Expressions of cooperation notwithstanding, the comments from Iran and Qatar run counter to a pledge made at the OPEC heads of state summit in Caracas late last month by Saudi Crown Prince Abdullah Bin Abdulaziz Al-Saud that his country could add more oil to the market, if needed.

The country's petroleum and mineral resources minister, Ali I. Naimi, later elaborated that Saudi Arabia is able to raise production by 1.5 million b/d within 30 days and up to 2 million b/d within 60 days.