OPEC has admitted it can do little or nothing to lower oil prices. Saudi oil minister Ali al-Naimi said Riyadh has told its customers it intends to keep output at 9.5 million barrels per day while considering lifting production quotas by 500,000 barrels a day.
OPEC President Sheikh Ahmad al-Fahd al-Sabah, however, said the move is hardly more than a political gesture to oil-consuming countries who worry that oil prices are interfering with economic growth. Just symbolic, was Sheikh Ahmads view of the planned change in policy.
The price on crude jumped to nearly $60 a barrel last week, causing a 200-point drop in the Dow Jones index. So far this year, according to an article in the Basque News channel Web site, EITB, average prices are nearly $51 a barrel, up from the 2003 average by $20 per barrel.
The news channel said some traders are claiming OPEC is powerless to keep prices from passing Aprils record above $58 a barrel because the global economy, led by China and the U.S., is consuming more oil in the last half of this year.
Nauman Barakat, at brokers Refco in New York, said: The bulls are going to look at OPEC and say theyre almost maxed out on capacity when demand in the fourth quarter is for another million barrels a day on top of what theyre producing now. We may be heading towards $60.
Little, if any extra output is expected from OPEC because the 10 members who are holding supply allocations are already close to the proposed limit of 28 million barrels per day.
Libyan Energy Minister Fathi Bin Shatwan commented: Everybody in OPEC is at full capacity. Maybe Saudi Arabia has something left, but it is heavy oil, so in practical physical terms, we have nothing.
Matthew Simmons, international banker to the energy industry, reports global demand for oil grew by 14 million barrels per day in 10 years. Simmons said 74 percent of the demand is supplied by Mid East oil and the prime supplier is Saudi Arabia with 36 percent of the Mideast oil, reserves.
Simmons said most Mideast producers are past their prime. He said Iran peaked at 6 million barrels per day in 1970 and Iraq, Kuwait, Oman, Syria and Yemen are all past their peak. Many of the big oilfields in the Mideast are past their peak output, Simmons said.
From the July 13-19, 2005, issue