OPEC output increase likely in May despite price drop: president
Kuwait City (Platts)--11Apr2005
OPEC will most likely press ahead with an increase in its production ceiling in May despite the recent sharp fall in oil prices in an effort to satisfy expected higher demand in the third quarter, OPEC president Sheikh Ahmed Fahed al-Sabah said Saturday. He told reporters that he would continue consultations with OPEC ministers about the output increase despite a drop in last week's record breaking prices. Sheikh Ahmed initiated discussions about the increase after US WTI traded at a record $58.28/bbl Apr 4. Prices have since fallen sharply, with front month WTI closing at $53.32/bbl Friday. Although "the reason to start the discussion has been removed," the talks will go on, Sheikh Ahmed said, adding that he was in contact wtih ministers on a "nearly daily" basis. "I think the market will force the increase in the second quarter. This is my belief as Kuwait. As Kuwait I think the market behavior will force the producers to increase their production in May. This is my belief. I think the 500 (thousand b/d) will be enough to start," Sheikh Ahmed said. OPEC ministers agreed at a meeting in Isfahan Mar 16 to raise their 27-mil b/d production ceiling by 500,000 b/d immediately. They also authorized the president to order a second 500,000 b/d increase in May if prices remained too high. Sheikh Ahmed said Apr 4 that he initiated the talks Apr 2. The question of whether to release the additional 500,000 b/d was "the million-dollar question," he said, adding: "What we believe is that we have to continue with our communication even though the price is not what it was in Ishafan. But we have to continue (the talks) because...we have to prepare ourselves if the price goes above average. If we need to increase, we should do it...We have to prepare ourselves because all the numbers say there will be an increase in demand in the third quarter." Sheikh Ahmed said demand in the third quarter was expected to increase by 1-mil b/d. He said although the reason for the second increase had been removed after prices came down, "we have to continue to discuss because the situation and (for) the stability of the market." This story was originally published in Platts Global Alert http://www.globalalert.platts.com
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