OPEC to invest $130b on output enhancement scheme
AS supply crisis continued to stoke global oil price hike, member countries of Organisation of Petroleum Exporting Countries (OPEC) are to invest about $130 billion (N16.6 trillion) by 2012 for output enhancement scheme to meet rising demand.
The member countries have over 900 billion barrels or more than 78 per cent of the total proven crude oil reserves of some 1.2 trillion barrel.
OPEC studies have shown that world oil demand is projected to rise from the current 83.3 million bpd to 89.7 million bpd by 2010, to 96.5 million barrels per day (bpd) by 2015, 103.5 million bpd by 2020 and 117.6 million bpd by 2030. This is an increase of 33.4 million barrels per day (bpd) during a period of slightly more than 20 years.
Given this demand, member countries have embarked upon capacity expansion programmes to meet future demands.
Oil has surged above $70 a barrel from around $50 in January and is within sight of its August 2006 all-time high above $78. US gasoline prices have been the main driver in this years rally as refiners struggled to build stocks to meet peak summer demand in the world's top consumer.
At the weekend, oil rose above $75 a barrel in London, nearing 11 month highs, amid renewed concerns over tensions in key producer Nigeria and broader worries that global energy supplies will tighten going forward.
At 12.28 p.m., benchmark Brent crude contracts for August delivery were up 79 cents at $75.54 a barrel, having earlier struck a high of $75.66, its highest point since August 11, 2006.
Meanwhile, New York crude contracts for August delivery were up 62 cents at $72.45 a barrel.
In news out earlier, Nigerian gunmen threatened to kill a three-year-old British girl kidnapped recently, although the main militant group in the country, MEND, condemned the kidnappings.
MEND, however, remains at loggerheads with the Nigerian authorities and attacks against the oil industry have increased ever since the group called off its cease-fire with the government earlier this week.
On Wednesday, gunmen attacked an oil rig operated by Shell in Nigeria and seized five expatriate workers in the Soku region of Rivers State.
Petromatrix analyst, Olivier Jakob said while the situation in Africa's biggest oil producer is underpinning oil prices, it seems market players are looking to bet prices up come what may.
'There's still a lot of fear premium in the market, we saw it in the (U.S. inventory data) which was bearish all over ... but still the market is being bought,' he said.
The U.S. Energy Information Administration released data that showed a surprise rise in crude stocks last week as well as a greater than expected increase in gasoline supplies.
The rise in U.S. crude left overall stocks at near their highest levels in nine years, and although gasoline inventories remained below average levels, gasoline production reached a new record level last week.
Also, refinery operating capacity rose to 90 pct last week.
Olivier said the current fear premium in the market has been driven by constant warnings from the likes of the International Energy Agency that global supplies will fall near record low points this year unless OPEC ups output.
'The International Energy Agency (IEA) has put such a fear premium in the market that crude futures remains bought no matter what,' he said.
OPEC, which produces more than a third of the world's crude oil, is for now resisting calls to increase output, arguing the crude stocks are plentiful and that it is the refining bottleneck that is keeping prices high.
Global Insight analyst, Simon Wardell said OPEC is relying on an increase in production from non-cartel sources later this year to meet an expected increase in oil demand.
He added, however, that supply from non-OPEC sources is known to be very unreliable and that the market could in fact see a big stock draw-down unless OPEC opens up the taps.
Oil prices have gained more then four per cent since the start of the month and are now near all time record highs above $78 that were struck in July and August last year.
