OPEC output increase likely in May despite price drop

OPEC output increase likely in May despite price drop: president

Kuwait City  (Platts)--11Apr2005


OPEC will most likely press ahead with an increase in its production ceiling
in May despite the recent sharp fall in oil prices in an effort to satisfy
expected higher demand in the third quarter, OPEC president Sheikh Ahmed Fahed
al-Sabah said Saturday. 

He told reporters that he would continue consultations with OPEC ministers
about the output increase despite a drop in last week's record breaking
prices. Sheikh Ahmed initiated discussions about the increase after US WTI
traded at a record $58.28/bbl Apr 4. Prices have since fallen sharply, with
front month WTI closing at $53.32/bbl Friday. Although "the reason to start
the discussion has been removed," the talks will go on, Sheikh Ahmed said,
adding that he was in contact wtih ministers on a "nearly daily" basis. "I
think the market will force the increase in the second quarter. This is my
belief as Kuwait. As Kuwait I think the market behavior will force the
producers to increase their production in May. This is my belief. I think the
500 (thousand b/d) will be enough to start," Sheikh Ahmed said.

OPEC ministers agreed at a meeting in Isfahan Mar 16 to raise their 27-mil b/d
production ceiling by 500,000 b/d immediately. They also authorized the
president to order a second 500,000 b/d increase in May if prices remained too
high. Sheikh Ahmed said Apr 4 that he initiated the talks Apr 2. 

The question of whether to release the additional 500,000 b/d was "the
million-dollar question," he said, adding: "What we believe is that we have to
continue with our communication even though the price is not what it was in
Ishafan. But we have to continue (the talks) because...we have to prepare
ourselves if the price goes above average. If we need to increase, we should
do it...We have to prepare ourselves because all the numbers say there will be
an increase in demand in the third quarter." Sheikh Ahmed said demand in the
third quarter was expected to increase by 1-mil b/d. He said although the
reason for the second increase had been removed after prices came down, "we
have to continue to discuss because the situation and (for) the stability of
the market."

This story was originally published in Platts Global Alert
http://www.globalalert.platts.com

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