OPEC plans a massive rise in oil production

Jul 23, 2004 02:00 AM

Before the end of the current year OPEC will raise the volume of its oil output by no less than 10 %, OPEC president Purnomo Yusgiantoro, Indonesia's Minister of Energy and Mining Industry, told. He said the world oil cartel would make every possible effort to stabilise the world energy markets and guarantee acceptable crude prices both for oil exporting countries and for countries consuming oil, fuel and lubricants.
Purnomo emphasised that already OPEC is producing an average of 2 mm bpd of oil over and above its officially set quotas, which make up today 25.5 mm bpd. (At a recent ministerial conference in Vienna on July 21, 10 members of the world cartel disavowed their former decision adopted at the June 3 conference in Beirut to increase from August 1 the aggregate oil output quotas by 0.5 mm bpd.)

The head of the world oil cartel said that there is a huge unpredicted surge in demand for crude oil on the part of China, the US, Japan and some European economies. In order to somehow calm down the jittery situation created on world crude markets, OPEC can utilise the cartel's possibilities and before the end of 2005 increase quotas for the production and export of oil by 2.5-3.5 mm bpd, the OPEC president noted.
To settle prices the cartel disposes of such a mechanism as quotas for production, voluntary restraints (mostly unobserved, however) which are assumed by the organisation's members in proportion to oil output volumes (for example, Iran produces 3.750 mm bpd, consuming 1.360 mm barrels, with the difference -- 2.390 mm barrels -- being supplied for export).

But, in the view of many analysts who cite the pattern of oil supplies over years, the ratio of demand to supply of the black gold depends not so much on production quotas of OPEC members as on non-market factors. Practically all members of the organisation are either themselves subject to internal political instability or are situated in unstable regions.
This greatly reduces the cartel's ability to deliberately and purposefully regulate world oil prices. Besides, analysts believe, with the exception of perhaps Saudi Arabia and the United Arab Emirates, no further sharp rise in oil production is to be expected.

It will take several years and a dozen or so of billion dollars in order to bring new deposits into operation.
Considering all this, analysts have come to the conclusion that OPEC's price-regulating role is not so big as believed until recently, although these countries do provide now about 30 mm barrels (although the OPEC president speaks of 27.5 mm barrels) out of nearly 80 mm barrels of daily world demand for oil.

Source: Russian Information Agency Novosti
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