OPEC is on track to boost supplies to world markets by 500,000 barrels per day (bpd) next month to help build stockpiles ahead of an anticipated demand surge later this year, the cartel’s president said on Monday.
Six straight days of oil price declines have dropped U.S. oil below $53 a barrel, but Gulf oil producers appear committed to turning up the taps and piling up global inventories.
Sheikh Ahmad al-Fahd al-Sabah, also Kuwait’s oil minister, told Reuters that production from the group’s 10 members bound by quotas was expected to rise to 28.5 million bpd in May from just over 28 million now.
“I believe, as Kuwait, the market will dictate an extra 500,000 (in May) in preparation for the third quarter,” he said in an exclusive interview at Parliament. “This will be a hike in actual production.”
The Organisation of the Petroleum Exporting Countries increased output limits by 500,000 bpd in March to 27.5 million in a bid to cool prices and left room for a second, 500,000-bpd rise before a June meeting if prices failed to drop below $55.
Some in OPEC, particularly Saudi Arabia and fellow Gulf producers, are keen to boost output now to encourage stockbuilding in the coming months to avoid a potential supply crunch and price spike late this year.
But not all OPEC members are convinced of the need to raise production. Algerian energy minister Chakib Khelil said on Saturday that markets already were well supplied.
“I do not see why we should increase production if our refining capacities are limited,” said Khelil. “The market is even better supplied than last year.”
The 11-member producer group expects the call on its crude oil during the last three months of 2005 to swell to 30.3 million bpd from 28.5 million in the third quarter.
Sheikh Ahmad said core Gulf OPEC producer Kuwait was pumping 2.65 million bpd now and would maintain that flow rate in May.
That implies that the bulk of the additional oil will arrive courtesy of top world exporter Saudi Arabia, which holds the lion’s share of spare production capacity.
“I think Saudi Arabia will be the main country with the production,” said Kuwait’s Sheikh Ahmad in later remarks.
OPEC delegates said earlier this month the kingdom was pumping about 9.5 million bpd this month, leaving 1.5 million of spare output.
Asked about comments by OPEC’s acting secretary-general Adnan Shihab-Eldin that the cartel is eyeing $50 as a potential ceiling for oil prices, Sheikh Ahmad said:
“This issue is still under study, we can’t rush things...But what Dr Adnan has said is similar to what is being suggested by some European Union members...that the ceiling should be wide, from $25 to $50. There is no consensus up to now.”
Kuwait’s total production capacity will be 2.78 million by the end of April when capacty rises at an oil facility in northern Kuwait following repairs, Sheikh Ahmad said.