KUWAIT: Opec may start to rein in supplies above its formal output limits if the group decides global oil inventories are piling up too quickly, the President of the producer group said yesterday.
Shaikh Ahmad Al Fahd Al Sabah said the group would keep pumping nearly flat out at around 30.3 million barrels per day (bpd) until it meets on June 15 to chart production policy.
But he said Opec could decide then to trim supply in excess of official limits, now running close to one million bpd.
“That may be,” he said. “If the stockbuild is above the agreed-upon levels, which is the five year average, then this may be the start of reducing the overproduction.” Shaikh Ahmad, also Kuwait’s Oil Minister, said oil prices, which have dropped more than $11 since an early April all-time high of $58.28, would also need to be at a “suitable” level before production could be curbed.
Opec producers have been boosting output steadily since March to build a cushion of stocks ahead of an anticipated fourth quarter demand surge.
The strategy has had visible signs of success, with prices plunging and stockpiles in the United States, the world’s biggest energy user, rising to the highest levels since July 1999.
Some analysts believe the group will have to reduce output during the third quarter to prevent a glut this winter.
So far OECD stocks are still well below the level of 56 days of forward demand cover that Opec has said that it would see as excessive.
The International Energy Agency, which advises industrialised nations on energy policy, said last week that OECD oil stocks had swelled to 53 days of forward demand cover by the end of March at 2.59 billion barrels.
According to Reuters calculations, oil stocks in the United States, Europe and Japan have risen by a further 40 million barrels since the end of March. This holds forward demand cover steady for higher third quarter consumption at 53 days. Shaikh Ahmad again reiterated that an Opec basket price of $40 – $5 below its current value – was an acceptable level.                 – Reuters
Last update on: 20-5-2005