18-03-05

OPEC pledged in a report to continue to increase production to meet demand but warned that shortage of refining capacity was also to blame for high oil prices.
"Higher OPEC output is needed to ensure comfortable commercial crude oil stock levels, both in absolute terms and in days of cover, given expected high demand in the fourth quarter approaching 86 mm bpd," OPEC said in its monthly oil market report for March.
"OPEC, on its part, will continue to accelerate efforts to increase production to meet rising demand and maintaining adequate spare capacity as current market developments once again underline the importance of its role in stabilizing the market," the report said. "These efforts are particularly necessary in light of the ongoing slowdown in non-OPEC production."

OPEC decided at a meeting in the Iranian city of Isfahan to increase its production quotas by 500,000 bpd to 27.5 mm bpd, and said it was ready for another half a million bpd hike if necessary. But the report also pointed out that "downstream constraints," such as "the persistent shortage of appropriate refining capacity," were also continuing "to exert pressure both on product and crude prices."
OPEC said this showed a need for "medium-term investments... to address the industry-wide shrinkage in global spare capacity, particularly in the downstream sector."

OPEC forecast that world oil demand would grow in 2005 by 1.9 mm bpd, or a yearly increase of 2.3 %, "resulting in average global demand of close to 84 mm bpd for the current year."
"Although (world) economic growth has been revised slightly down to 4.1 %, solid consumption in several OECD countries and China has once again led to an upward adjustment in global oil demand growth," OPEC said. It said that on the supply side, OPEC crude oil production in February, based on secondary sources, was estimated at 29.6 mm bpd, an increase of 0.2 mm bpd from the revised January figure.

Non-OPEC oil supply for 2004 is estimated at 49.7 mm bpd, which is 1.1 mm bpd higher than the 48.6 mm bpd estimated 2003 figure. Non-OPEC supply in 2005 is expected to reach 50.8 mm bpd, an increase of 1.1 mm bpd over the 2004 estimate, the report said.
It said that US commercial oil stocks were still 40.2 mm bpd above last year's level. Prices shot to new highs in world oil markets, with New York's main crude contract above $ 57 per barrel for the first time, underpinned by robust global demand.

Source: AFP