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OPEC ready to pump more oilPosted by Retirement on: 2005-09-16 12:03:16 in category:
401(k) [ Print | Permalink / 0 Comment(s) ] By Peg Mackey LONDON (Reuters) - OPEC ministers look set to raise oil supplies when they meet in Vienna next week with prices near record highs and consumer nations calling for more crude. The Organization of the Petroleum Exporting Countries may agree to boost output by at least 500,000 barrels per day (bpd) at the two-day meeting starting Monday in the Austrian capital. But with world markets awash in crude oil and the cartel already pumping nearly flat out, many see the move as symbolic. "Political expediency would argue for an increase in output, while commercial logic would argue that the pressure should be resisted when OPEC meets next week," said Kevin Norrish, an analyst at Barclays Capital. With oil prices up 50 percent since the start of the year, consumer governments are piling pressure on the 11-member cartel to hoist production. In real terms prices are at levels unseen since 1980, the year of the Iran-Iraq war. But OPEC admits it cannot produce what the world needs most -- refineries to crank out gasoline and heating fuel. Ministers will be debating price as well as volume at OPEC's Vienna headquarters. Deputy oil ministers in OPEC's Long-term Strategy Committee meet Saturday to discuss a new price target. The producer group in January scrapped its $22-$28 a barrel price band for its basket of crudes after prices soared well above that level during the past year. The OPEC basket was last valued at $57.53. Although intended as a "good will gesture," an OPEC supply increase could in fact cause headaches for producers, namely those in the Gulf. That is because most of the spare capacity is of heavy, high sulphur crude that is hard to sell as many refiners lack the high-tech units to turn it into gasoline. For months, the exporter group -- with the exception of lead producer Saudi Arabia -- has been pumping nearly flat out at just over 30 million bpd. Riyadh has been churning out about 9.5 million bpd since May and says it is prepared to pump flat out at 11 million bpd if consumers need more crude. "Crude oil is not the issue and sour crude is most definitely not the issue," said Michael Wittner, head of energy market research at Calyon. "So that's not going to help." CRUDE TANKS FULL OPEC has succeeded in filling up commercial crude oil stockpiles ahead of the seasonal demand peak in the fourth quarter, but it has failed to tame runaway prices that roared to $70.85 after Hurricane Katrina. The savage storm hit the heart of U.S. refining operations last month, sparked a gasoline crunch and swept retail pump prices above $3 a gallon. It also strengthened OPEC's argument that a global shortage of refineries, and not the crude to be processed in them, was driving a two-year rally that has doubled the price of oil. But evidence is emerging that record prices are dampening oil consumption, with the International Energy Agency and the OPEC secretariat trimming their forecasts for global demand growth this year and next. The cartel itself pegs the requirement for its crude at 30.3 million bpd for the fourth quarter of this year, just a touch above what the group is pumping now. Demand for OPEC oil in 2006 is expected to average 29 million bpd. It is clear that the United States, the world's biggest consumer, does not want more heavy, high sulphur crude that is hard for some refiners to process into light transport fuels. Only 200,000 barrels of sour, high sulphur crude were sold when Washington offered 30 million barrels of crude from emergency stockpiles after Katrina. "That does raise the question of why there is pressure on OPEC to unleash extra heavy sour barrels on a market which clearly does not want them," said a Barclays Capital report. The prolonged closure of four sophisticated hurricane-damaged refineries in the U.S. Gulf has further eroded demand for sour crude. Saudi Arabia may have to deepen price discounts for its crude to move more. "The reckoning will come when we see how the Saudis price their crude," said Wittner. "It's not enough to offer it, they have to price it attractively." Homepage Please support are sponsors. To design you custom retirement plan. http://www.retirement-plan.us For planing a IRA rollovers. http://www.ira-rollover.us Professional asset allocation and the wonders it can do. http://www.asset-allocation.us Professional money management: National ranked performance. http://www.roth-ira.us Managers selected to fit your needs. http://www.money-managers.us |
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