OPEC likely to raise output ceiling if prices stay high: Shatwan

Paris (Platts)--9Aug2005

OPEC will likely raise its output ceiling by 500,000 b/d if prices stay at
present levels when the 11-member cartel meets September 19 in Vienna to
discuss output levels for the third quarter, Libya's oil minister Fathi bin
Shatwan said Tuesday, "I think they will study the market first. If they think
it is necessary, they will increase the ceiling by another 500,000 b/d. If
prices stay at the $60/bbl level, they will do something," the minister told
Platts in a telephone interview. 

Crude prices shot up to a record high of $64.27/bbl in New York Monday before
falling back to close at $63.94/bbl, driven largely by terror threats against
US interests in Saudi Arabia, tight supplies and a slew of refinery snags.
"There are technical problems and geopolitical issues affecting the market as
well as a fear that non-OPEC countries like Russia are not producing what they
should be," Shatwan said. Although OPEC production has been rising alongside
surging oil prices, most member countries are now pushing against the limits
of their output capacity.

OPEC's Kuwaiti president Sheikh Ahmed Fahed al-Sabah at the weekend said OPEC
had boosted its production to 30.4-mil b/d, supplying the market with an extra
300,000 b/d during the last two weeks. Sheikh Ahmed pinned the recent rally in
prices on refinery problems in Asia and the US and the recent death of Saudi
Arabia's King Fahd. 

"OPEC members have already increased their production by 300,000 b/d, and some
countries are building extra capacity so I believe we can add a little more
production by the end of the year and this will stabilize the market," Shatwan
said. He said Libya would reach its medium-term output target of 2-mil b/d by
the end of the year or early 2006, adding 300,000 b/d to its current 1.7-mil
b/d. The additional production will come from Eni's Elephant and Wafa fields,
he said. OPEC decided at a Jun 15 meeting to raise its formal ten-member
output limit by 500,000 b/d to 28-mil b/d from Jul 1, and to consult on a
second quota boost of the same size should prices fail to decline or rise
further.

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