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OPEC Secretary General: "We didn't Want to Rock the Boat" |
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Friday, 03 July 2009 |
 OPEC is optimistic that the production policies its Member Countries signed up to in September 2008 to counteract the effects of the global financial crisis will continue to fuel a positive reaction in the international oil market.
OPEC has been working with impressive results to remove a total of 4.2 million barrels/day of crude oil from the market.
Compliance by Member Countries to the output cut, involving 11 of the
Organization’s 12 Members (Iraq is exempt), has been hovering at 79–80
per cent since February, a figure deemed unprecedented in OPEC’s
history.
“The international oil market has been reacting slowly … but
positively,” commented OPEC Conference President, Eng José Maria
Botelho de Vasconcelos in an article in OPEC’s monthly magazine “OPEC
Bulletin.
“The spirit of our final communiqué sends a signal of optimism to OPEC
Member Countries,” de Vasconcelos, who is Angola’s Minister of
Petroleum underlined. “Our optimism is coupled with realism — but it is
a signal that OPEC will keep sending to the market,” stressed the
Conference President. “The Organization
will continue to work towards attaining a fairer and more balanced crude oil price.”
Such a price, he added, was essential for the success and well-being of
the petroleum industry, so that it could make regular investment to
ensure that sufficient
supplies were available to cover market demand in the future.
All members agreed that the weakness in global oil demand, caused as a
result of the “severe and broad” impact of the ongoing global economic
downturn,
precipitated by the financial crisis, was still likely to remain for some time.
“Indeed, since the second half of 2008, world oil demand growth has
witnessed its first decline since the early 1980s,” observed the
communiqué. It said the Ministers were pleased to observe the positive
effect that OPEC’s production decisions, aimed
at redressing the supply/demand balance, were having on restoring some degree of stability to oil prices.
However, the Conference noted that crude volumes entering the market were still in excess of actual demand.
Although crude inventories had fallen over the preceding two months,
inventories still remained high. For example, at the end of April, OECD
commercial oil stocks were said to have been standing close to the
record high witnessed in February 1998.
The communiqué noted that although recent positive economic indicators
pointed towards the possibility of the recession bottoming out before
the end of 2009, the world was nevertheless still faced with weak
industrial production, shrinking world trade and high unemployment.
“For this reason, the Conference decided during last summit to maintain
current production levels unchanged for the time being,” it said.
“Very importantly, it was considered inadvisable to ignore the impact
of the fall in crude oil prices witnessed over the preceding 12 months,
coupled with the abiding price volatility.
Oil market remains oversupplied but “slowly, a small recovery is taking
place … and we in OPEC did not want to give a wrong signal to the
global economy as it recovers,” he said when questioned about the
Ministers’ decision not to tamper with the Organization’s current
output ceiling.
He said it was true the market was still oversupplied, with OECD crude
and product stocks standing at around 200m b, which represented 61 days
of supply, while floating storage was estimated at another 130m b.
But despite the oversupply, stressed El-Badri, at the same time crude
prices were improving bit by bit “and through our actions today we did
not want to rock
the boat.”
He said the Ministers were very happy with the overall compliance with
the Organization’s current production allocations which currently stood
at about 79 per cent.
“In March, the level was around 81 per cent — now it is at 79 per cent,
but this is the first time that OPEC Member Countries have been able to
achieve this kind of percentage and it is positive that Members are
adhering
to their quotas.
“But, as Secretary General, I will always be asking for better
compliance and if, by next month, we see 85 per cent or 90 per cent,
then that would be an excellent
achievement,” he added. Asked about the fall in crude oil prices since
the summer of 2008, the OPEC Secretary General said that since late
last year, the Organization’s Members had lost around $370bn in revenue.
“This loss, one could say, with the lower price of crude, could be
viewed as being OPEC’s stimulus package for the consumers,” he said.
El-Badri noted that OPEC had been expressing concern about an oil price
of $40–50/b because it knew that this level of price could not support
the investment that was needed to ensure orderly future supply.
“Without this investment, it means we have no additional supply and if
the world economy picks up in the future, there is the danger we will
have a shortage,” he said.
“So what we are aiming at is a reasonable price that will be
comfortable for the producers and the consumers,” he said. El-Badri
said the Organization did not really have a target oil price — the
Ministers were just saying that at $70/b, they could invest and still
have a reasonable income for Member Countries. Turning to OPEC’s
cooperation efforts, and specificallya proposal by the G-8 countries to
establish a new producer/consumer energy agency, El-Badri said the
Organization did not have any problem cooperating with any new body or
entity, as long as it was in the interests of OPEC.
It had entered into several dialogues with agencies and governments, including the EU, Russia and China.
“At the moment, we do not know much about this proposed agency by the
G-8 — what its purpose is and what its goal will be … we will have to
study that,” he added.
Makis Theodoratos, Hellenic Shipping News
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