November 16
Oil prices in the $75-$78/barrel range are "good" and would not
hinder the global economic recovery, OPEC president Jose Botelho de
Vasconcelos said November 16.
De Vasconcelos, who is the Angolan oil minister, said even $80/barrel
would not harm the world economy while allowing oil-producing members of
OPEC to invest in new capacity.
But he declined to say what action OPEC might take at its next
ministerial meeting on supply though he suggested stocks being held by
consuming nations were currently a bit on the high side.
US light sweet crude oil futures traded just above $77/b on November 16.
The OPEC president, speaking on the sidelines of an energy conference in
the UAE capital, also said that while there was enough supply on the
market, consumer stocks were higher than OPEC would like though it was
too early to say if the producers' group would change its overall
production target when it meets in the Angolan capital Luanda on
December 22 for the last meeting of the year.
"You must wait, in December we will analyze the situation and take a
decision," de Vasconcelos said, adding that the market was currently
oversupplied, with forward cover in consuming countries at over 60 days.
"Forward cover is currently 62 days," he said, adding he would like to
see this fall to around 52-53 days. "At that level the market will be
balanced," he said.
De Vasconcelos said compliance by the 11 OPEC members bound by quotas--
Iraq is excluded--with a total 4.2 million b/d cut agreed last year
stands at 65% with his own country producing below target. The cuts took
the OPEC-11 ceiling down to 24.845 million b/d, a level that was rolled
over in September for the third time this year.
Angola, current holder of the rotating OPEC presidency till the end of
the year, is currently producing at 1.7 million b/d, below its OPEC
target of 1.9 million/d. "We have reduced," he said.
Angola hopes to raise its production capacity to 2 million b/d in the
next two to three years when new blocks are developed, he added.
Speaking earlier on the topic of Energy Security in the Gulf, De
Vasconcelos said that while OPEC had shown willingness "time and time
again" to secure oil supply "in both normal and abnormal times," the
group's members needed some guarantees that it would not invest in new
capacity that will not be used in the future.
"We have abided by this and will continue to do so in the future. In the
final analysis, we want to sell our oil and gas on world markets, to
help develop our economies and improve the living standards of our
people," he said. "These hydrocarbons provide our main source of income,
in some cases accounting for more than 90% of our export revenue. Why
should we want to restrict this process? That doesn't make sense. We are
committed to security of supply."
"However, what really concerns us in OPEC is the other side of the coin,
security of demand. We strongly believe that this should be given the
same weight as security of supply for consumers," de Vasconcelos added.
OPEC's latest projections according to a reference cased scenario were
for world oil demand to rise by 20 million b/d to 106 million b/d
between 2008 and 2030. But he said these were merely projections based
on current trends and the reality may be different.
"As we all know in this industry, producers cannot afford to invest
heavily in capacity that will not be used. It is, indeed, an expensive
business to maintain idle capacity. Neither producers nor consumers want
excessive, volatile oil prices in the future. And this can best be
avoided by making the right amount of investment today."
--Kate Dourian
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