OPEC chief could start talks on second hike over weekend: source

OPEC chief could start talks on second hike over weekend: source

London  (Platts)--24Jun2005


OPEC's president could start consulting members of the oil producer group this
weekend on going ahead with the second stage of a 1-mil b/d output ceiling
increase agreed last week in Vienna, an OPEC source said Friday, a day after
US light crude prices briefly hit an unprecedented $60/bbl. "If the price
remains very close to $60/bbl, you could expect consultations to start [at
the] weekend," the source said. OPEC president Sheikh Ahmed Fahed al-Sabah
said Monday that if oil prices were still high by the end of the week, he
would start consulting fellow OPEC ministers on whether to implement the
second 500,000 b/d increase that would take the OPEC ceiling to 28.5-mil b/d.
OPEC has still to implement officially the first 500,000 b/d tranche, but its
actual output in May was already higher than the new 28-mil b/d ceiling that
comes into effect next week on Jul 1. OPEC itself, which uses media "secondary
sources" to monitor its own output, calculated that the ten members with
quotas pumped an average 28.217-mil b/d in May.

The OPEC source, meanwhile, said that perhaps "the most important thing"
resulting from any consultations would be the implementation date of the
second increase. "The output hike is not in response to the sudden price hike
but because we are expecting growth in demand in the fourth quarter," he said.
"Our biggest concern is that $60/bbl is going to be a fact of life," he added.
Iran's OPEC governor Hossein Kazempour Ardebili said, however, that OPEC
should wait to see the impact of the first 500,000 b/d increase "and then
assess the situation." He reiterated that lack of sufficient refining capacity
was a major problem in the current market. Kazempour said it was possible that
prices could climb beyond $60/bbl but he said he was confident that if they
did, they would ease back later in the year. "The price could go higher in
July and even August, [but] later on it would decline," he told Platts by
telephone from Tehran. "In the wintertime I believe the problem will be eased
because stocks [will be] plenty and of the right type of crude."

This story was first published in Platts real-time news and market reporting
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