OPEC to Maintain Its Current 30mbpd Output Level

by Adam Smallman
Dow Jones Newswires
Jun 15, 2007

The Organization of Petroleum Exporting Countries said Thursday that there was no need for the group to inject further oil supplies into the market in the face of rising demand, an implicit rebuke to the International Energy Agency's call this week for urgent new supplies from the group.

In an unusual statement well ahead of its formal policy meeting Sept. 11 in Vienna, OPEC Secretary General Abdalla Salem el-Badri said 12-member OPEC, which currently meets 35% of the world's oil consumption, would maintain its daily output of 30 million barrels a day.

"However, considerable uncertainties continue to surround world oil demand and demand for OPEC oil," he added.

"But a combination of current high inventory levels and increasing OPEC spare capacity, which is expected to reach around 15% in the second half of this year, means there are adequate supplies available to cope with any upward revisions to oil demand forecasts."

In the statement, El-Badri continued, "OPEC notes oil markets remain well supplied and market fundamentals do not require any additional supply from the Organization at this time."

"OPEC will continue to monitor developments and is prepared to help mitigate any tightness which may emerge at any future stage," he added.

Without identifying the International Energy Agency directly, the producer group's statement appears to be a response to this week's hard-hitting report by the agency that warned of the prospect of a world oil supply deficit this year due to record demand, rising project delays and a reluctance by OPEC to ship more crude over the summer.

The IEA Tuesday raised its estimated daily need for OPEC's oil this year by half a million barrels to 31 million barrels, and expressed concern about its ability to offset demand with planned capacity expansions by the end of this year of just 700,000 barrels.

With the need for OPEC crude this year set to climb 2.5 million barrels a day, the challenge to OPEC "would appear to be a key impending market dynamic," the agency said.

"We need an awful lot more crude," IEA supply expert David Fyfe said at the time. "To us, the balance looks particularly stark at the moment."

El-Badri added that the group will keep a close eye on the state of the market, but noted that oil stockpiles held by industrialized nations are comfortable.

Stocks are some 34 million barrels above their five-year average and are at a record in Europe, with oil stockpiles in the U.S. 24 million barrels above their five-year average, he said.

Gasoline stocks Stateside are generally climbing, he noted, and OPEC's output of 30 million barrels a day will help keep stocks comfortable assuming "there is no significant change in market conditions."

El-Badri also said there were expectations of increased oil output from non-OPEC producers this year, a sharp contrast with the IEA's view.

The agency said this week that oil supply growth from non-OPEC producers is set to fall below the psychologically significant 1 million barrels a day this year, thanks to project delays, field exhaustion, and maintenance programs.

It signals the end to three consecutive quarters of plus-1 million barrels-a-day growth from non-OPEC suppliers.

"We're concerned about delays in new project start ups," the agency's Fyfe said, "and to be honest, they're proliferating."

Also, the medium-term picture for Russia, the world's largest oil producer, is one of stasis, with its output reaching a plateau within two years thanks to the uncertain investment climate under President Vladimir Putin and constraints in oil services.

The agency said the country's output may climb 7% to 10.6 million barrels a day by 2010 but then slip a little over the next two years.

The IEA also revised year-on-year world oil demand growth for this year significantly higher to 2%, against its 1.8% forecast last month, pushing outright demand through 86 million barrels a day for the first time.

Though well short of the 4% demand growth seen in 2004, it is double last year's growth despite consistently high oil prices.