Amman/Paris--OPEC will continue to keep oil markets well supplied ahead of expected higher demand later this year and is unlikely to output when ministers meet next month if demand remains strong, two top officials from the cartel said May 20, seemingly unfazed by the oil price drop of more than ten dollars since early April.

Nigeria's presidential petroleum adviser Edmund Daukoru expressed some concern at the drop in prices, although he suggested that stricter quota compliance rather than a formal output cut would be sufficient to prevent prices falling much further.

OPEC president Sheikh Ahmed Fahed al-Sabah, was asked on the sidelines of the World Economic Forum in Jordan whether OPEC would cut supply in response to the price decline. "Until now, no," Sheikh Ahmed, who is also Kuwait's oil minister, said. "This will depend on growth in demand."

Sheikh Ahmed, who is also Kuwait's oil minister, said that barring unforeseen geopolotical developments, he expected no major shift in oil prices ahead of the June 15 meeting in Vienna. "I also expect prices to remain stable," he said.

Acting secretary-general Adnan Shihab-Eldin, also attending the Forum, said OPEC would supply whatever the market needed and that if demand remained strong, no supply cuts were expected.

"It depends on what the market needs," Shihab-Eldin said. "If the market needs the oil, we will not cut supplies." Indeed, he indicated, OPEC's inclination was to keep markets well supplied in order to meet the expected growth in demand in the second half of this year. "There are expectations to continue to supply the market with adequate supplies to keep prices stabilized," Shihab-Eldin said. "OPEC will keep the market well supplied ahead of expected demand growth in the third and fourth quarters."

Nigeria's top oil official Edmund Daukoru said that for the time being, stricter adherence to OPEC crude output quotas rather than a formal cut in quotas should be enough to prevent oil prices from falling to unacceptable levels.

"We are nowhere near a [price] crash. This is an early warning that we should reinforce discipline maybe better than we have been doing," Daukoru told Platts in a telephone interview. "There has always been a flexible approach to the market situation. If prices are getting to melting point, then we should produce whatever we can. If, in the process, the price takes a nosedive, then of course we will call for more discipline and that is exactly what is happening," Daukoru said.

Daukoru said it was too early to say how much prices would have to fall for OPEC to cut production formally, pointing out that the June meeting was still several weeks away.

"It is still anyone's guess what prices will do between now and the meeting, we will have to take it as it comes. But I think between now and the June meeting, more discipline is what we should be urging members to do." He said Nigeria would do what was necessary to rein in its own production, which he said was currently running at 2.37-mil b/d, against its official quota of 2.265-mil b/d.

"When it is time to jack up production considerably, those with the biggest capacities, the Saudis and Kuwaitis, take on the bulk. So when it comes to cutting back, they remain the swingers. But we will do what we can, if we have to cut," Daukoru said.

US light crude prices were trading below $47/bbl Friday, more than $11/bbl down from the $58.28/bbl all-time high reached Apr 4. The price decline has sparked concerns among some OPEC member countries about current output policy, which aims at allowing global consumer stocks to rise by above-normal levels to help meet increased oil demand later this year.

Keeping consumer oil stocks low had been a key part of OPEC's market management strategy until the March meeting in Isfahan, Iran, when Saudi Arabia signaled a shift that was confirmed this week by oil minister Ali Naimi. Riyadh, Naimi said during a visit to Washington, had made a "conscious" decision to allow global stocks to grow ahead of expected heavier demand later this year.

Sheikh Ahmed said the drop in prices reflected a build in crude stocks since the Isfahan meeting. "The market is well supplied," Sheikh Ahmed said. "We are in a better situation than during Isfahan. Stock levels have improved since then." Given current ample supply and rising inventories, an increase in OPEC's ceiling was unlikely at the upcoming June meeting, he added.

OPEC's current 27.5-mil b/d ceiling--which covers ten members but not Iraq--is largely notional as most members are pumping at or close to their capacity limits. Most are producing well above their quotas, but because Indonesia and Venezuela are incapable of meeting their quotas to the tune of several hundred thousand barrels per day, combined OPEC-10 output is running just 600,000 b/d above the ceiling, according to a Platts survey earlier this month. Only Saudi Arabia, which oil minister Ali Naimi says is currently pumping 9.5-mil b/d and can bring on an additional 1.5-mil b/d quickly if needed, has any significant volume of surplus capacity.

Updated: May 20, 2005