Oil pauses after slide, looks at OPEC capacity :: Namibia Internet Gateway cc ::

Articles: Oil pauses after slide, looks at OPEC capacity

Posted by admin on Monday, May 10, 2004 - 11:43 PM

SINGAPORE, May 11 (Reuters) - Oil prices held steady on Tuesday after tumbling $1 a day earlier as traders pondered whether a Saudi proposal for OPEC to raise crude output would have any impact on global supply and demand balance.
U.S. light crude slipped eight cents to $38.85 a barrel at 0514 GMT, just over $1 short of the 13-year peak touched on Friday at $40. Saudi Arabia, the world's biggest crude exporter, triggered the slump in prices on Monday by proposing that the OPEC cartel raise official production limits by at least 1.5 million barrels per day (bpd) when ministers meet on June 3 to review policy. Oil Minister Ali al-Naimi said the output increase was necessary to cool red-hot oil prices that threatened to dent global economic growth. "In the oil market, what the Saudis want, the Saudis get," said David Thurtell, commodities strategist at Commonwealth Bank of Australia in Sydney. The increase would more than reverse a cut of one million bpd to the official production ceiling from April 1, and might have the backing of Kuwait and the United Arab Emirates, both of which opposed the reduction last month. Iran also said at the weekend that it would not object to any supply increase at OPEC's policy meeting in Beirut next month. But latest estimates indicate that the Organisation of the Petroleum Exporting Countries, excluding Iraq, pumped in April about two million bpd above the official ceiling of 23.5 million bpd as it tried to dampen a price rally that had seen crude jump 20 percent this year. LITTLE SPARE CAPACITY Strong demand in China, low U.S. fuel supplies and an escalation of violence in the oil-rich Middle East have lifted crude prices to levels not seen since the run up to the first Gulf War after Iraq invaded Kuwait. "The April cut was talk, the overproduction is still there and all the rise will do is legitimise the overproduction. There won't be any material increase in supply to the market. This is designed to keep the market stable," said Dennis Kongsiri, vice president at Mitsui & Co Energy Risk Management in Sydney. "Maybe it will mean they will overproduce more, but there's not a lot of spare capacity left in OPEC, except for Saudi Arabia," Kongsiri said. OPEC President Purnomo Yusgiantoro was quoted on Tuesday as saying that high prices could last through the summer and there was little the producers' group could do to rein in gains. "I don't like these kinds of prices. These kinds of prices will really hurt everybody," Purnomo was quoted as saying in the Financial Times newspaper. "But this price level is not because OPEC is playing. There is not much OPEC can do." Purnomo, who is also Indonesian oil minister, blamed rocketing prices on very tight gasoline stocks in the United States, speculators and geopolitical issues, including ongoing unrest in Iraq. Iraqi crude exports were disrupted at the weekend by sabotage to a pipeline carrying oil to the key loading terminal at Basra, target of failed suicide bomb attacks two weeks ago. Crude loadings were continuing at Basra, although at a reduced rate and officials said flows should be fully restored on Wednesday. Another oil industry official said pumping was also halted along the the northern Kirkuk crude pipeline to the Turkish Mediterranean port of Ceyhan. No reason was given for the halt.

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