OPEC sec gen says oil price 'reasonable'; no supply shortage

Algiers (Platts)--15Nov2005

OPEC's acting secretary-general, Adnan Shihab-Eldin, said late Monday
that oil prices had fallen to more "reasonable" levels after spikes caused by
the US hurricanes, an indication that there was no shortage of supply.
     Speaking to reporters in Algeria, Shihab-Eldin was asked what decision
the group was likely to take on supply when ministers meet in Kuwait Dec 12.
     "The objective is to review the situation in the market and recent
developments. OPEC has already raised production by 5-mil b/d in the last
three years and has said that it is ready to supply more oil. There is no
shortage of crude oil," he replied.
     OPEC ministers agreed at their last meeting in Vienna in September to
maintain a group ceiling of 28-mil b/d but offer markets the 11-member club's
entire spare capacity of 2-mil b/d if required.
     "We have noticed that prices have come down and we believe that prices
are now at levels more reasonable given market fundamentals, compared to the
increases we saw in August and October after hurricanes Katrina and Rita,"
said Shihab Eldin. "Prices are reasonable."
     OPEC did not want to see prices move too high in such a way as to dampen
demand, he added. "OPEC wants to calm the market. We think that the best
prices are those that allow investments and allow world economic growth. 
     "The rise in demand, particularly in Asia, is structural and this
requires that prices be at levels that encourage investment," in future
capacity, Shihab-Eldin said
     "The OPEC basket is now between $50 and $55/bbl and some analysts believe
that prices could fall to $40/bbl," he said. "It is not in OPEC's interest for
prices to have a negative impact on world economic growth, which in turn would
curb demand," he said, adding that OPEC had not set a new price target since
abandoning a $22-$28/bbl price band in January this year.
     Oil prices have fallen below the $60/bbl level in recent days for US
light sweet crude oil futures, which traded at a record $70.85/bbl Aug 20.
Prices have come off by nearly 20% since then, largely as demand has fallen
off and production from the US Gulf Coast has been restored.
     "We have not yet taken a decision on a new price target but we feel the
current price is acceptable to all and will not compromise economic growth or
demand."
     Shihab-Eldin said that demand in 2006 was expected to rise by 1.5-mil
b/d. Non-OPEC producers would meet a large part of the incremental demand. He
estimated that demand would grow by an average 1.5-mil b/d for the next five
years or by a total 8-mil b/d while supply of crude oil and natural gas
liquids would grow by 12-mil b/d. OPEC would account for 7-mil b/d of the
total while non-OPEC would supply the balance.
     "We believe that markets will be balanced with the addition of new
capacity," he said.
--Lies Sahar, newsdesk@platts.com

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