OPEC President sees prices moderating on lower economic growth

Vienna (Platts)--19Sep2005

OPEC's President Sheikh Ahmed Fahed al-Sabah said Monday he expected
world oil prices to moderate as a result of slowing oil demand growth.
     Speaking in his opening address to the OPEC conference in Vienna, Sheikh
Ahmed said OPEC had responded to recent record oil prices by raising
production and speeding up plans to bring on stream new production capacity.
     OPEC's actions, he said, had prevented the disruption to US production
and refining facilities caused by Hurricane Katrina from developing into a
major energy crisis.
     Following are excerpts from his speech:     
     "OPEC's response to the hurricane's impact on the oil market has been
consistent with its actions of the past year in dealing with the price
increases and volatility.
     Throughout, OPEC has acted on two broad fronts. First, it has raised its
production ceiling several times, by a total of 4.5-mil b/d. This has, in
turn, led to a steady rise in OECD commercial oil stocks, to a level exceeding
their five-year average, both in absolute terms and in days of forward cover.
     And secondly, OPEC's member countries have sought to accelerate their
plans to bring new production capacity on-stream. This year, surplus capacity
will rise to more than 10% above the call on its oil.
     This additional capacity will be more than adequate to cover oil demand
growth throughout this winter and in 2006, providing a comfortable cushion to
deal with temporary supply interruptions.
     Furthermore, most of the new capacity from both OPEC and non-OPEC will
consist of lighter crudes, which are in much demand in the market.
     Also, since there are signs of slowing oil demand growth, one would
expect some price moderation in the future.
     While the situation for the upstream sector is under control, there is a
very different picture downstream, as has been exposed by Hurricane Katrina.
We, therefore, repeat our calls for the industry at large to pay close
attention to the constraints in the downstream segment of the business, in the
interests of overall market stability.
     In particular, concrete measures should be taken to encourage rapid and
sizeable investments in the refining sector, especially in conversion
capacity, which has persistently lagged behind market requirements and caused
oil price volatility.
     This is a challenge that should be addressed urgently, and the consuming
countries and international oil companies have the primary role and
responsibility to play in this."

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