Opec may increase output further to ease oil prices
The Organisation of Petroleum Exporting Countries (Opec) may increase output by 500,000 barrels per day to ease crude oil prices, which reached a record high of US $70.
The Organisation of Petroleum Exporting Countries (Opec) may consider an increase in its output in the forthcoming meeting in Vienna. Sheikh Ahmad Al Fahd Al Sabah, the cartel president said he will propose raising the output by 500,000 barrels per day (bpd) on September 19th, when the 10-member group is scheduled to meet.
“I will try, as the president, to propose the issue of increasing the production and the output ceiling at our coming meeting,” said Sheikh Ahmad, while expressing Opec’s concern about rising oil prices.
The Kuwaiti Energy Minister has also said that prices are no longer related to production, but to other factors like geopolitics, weather and refining.
Oil prices broke the psychological barrier of US $70 with Hurricane Katrina heading towards the Gulf of Mexico. Though prices later eased slightly, analysts do not predicts prices to go much below US $50.
The Gulf of Mexico normally pumps about 1.5 million bpd of US crude, a quarter of domestic output and equivalent to nearly 2% of global oil production, similar to the estimated spare capacity within Opec. The cartel had at least one million bpd of spare output capacity, mostly in the hand of its leading producer Saudi Arabia, which could supply the bulk of the proposed hike, the minister said.
“We are allowing the stocks to be build, and we are even allowing them to be build over 56 days (of forward cover) and even with that the prices are increasing,” he said. “For that, I think it is not Opec’s responsibility although we have to work in close cooperation with consumers to solve the problem.”
Strategists like David Thurtell, of the Commonwealth Bank of Australia, have said: “The only way we can avoid yet higher prices is if President [George] Bush releases supply from the Strategic Petroleum Reserve (SPR).”
The administration said in the past, it would release oil from the 700-million-barrel SPR only during a serious supply disruption, but had never given further details.