Crude Oil Price to Crash as OPEC Raises Output
•Nigeria’s output to increase by 40,000 b/d
From Chika Amanze-Nwachuku in Vienna, Austria, 09.12.2007
The Organisation of Petroleum Exporting Coun-tries (OPEC) at its 145th meeting yesterday in Vienna, Austria, announced an increase in crude oil output by 500,000 barrels per day with effect from November 1, 2007.
The decision, which the Secretary-General of the cartel, Abdalla El Badri, said was a sign that OPEC “cares” about its customers, is expected to bring down the price of crude oil, although the organisation was not specific on what price range the cartel would consider “optimal”.
After OPEC's announcement, light, sweet crude for October delivery fell 25 cents to $77.24 a barrel on the New York Mercantile Exchange after earlier rising above $78. In London, October Brent crude gained 18 cents to $75.66 a barrel on the ICE Futures exchange.
The expected fall in price may not affect Nigeria’s 2008 budget as it has already been benchmarked at $53.83 per barrel, although it may mean a significant reduction in the excess crude oil revenue and transfers to foreign reserves.
With the planned increase, OPEC’s total crude oil output will rise to over 27.2 million b/d. Nigeria's total output is expected to rise by eight per cent, which translates to 40,000 b/d.
OPEC supplies about 40 percent of world’s total crude oil needs.
El Badri, who briefed newsmen after the meeting yesterday, explained that the decision to increase output was as a result of a consensus reached by the member countries.
Nigeria’s production allocation before the rise in output stood at 2.3 million b/d, but the figures have remained unstable between 2.1mb/d and 2.2million b/d owing to the crisis in the Niger Delta which has often resulted in production shut-in.
The communique issued at the end of the conference observed that "the high demand winter season necessitates keeping the market adequately supplied.
“To this end, the conference decided to increase the volume of crude supplied to the market by OPEC Member Countries (excluding Angola and Iraq) by 500,000 b/d, effective 1 November 2007,” it said.
The conference also noted that ongoing “tightness” in the US products market continues to affect the level of product stocks and prices, and reaffirmed its long standing commitment to ensuring sound supply fundamentals at all times and to offering an adequate level of spare capacity for the world at large.
“The conference also recorded the readiness of member countries to swiftly respond to any developments which might jeopardise oil market stability and their interests. For this purpose, in addition to the organisation vigilantly monitoring supply/demand fundamentals, the conference agreed to reassess the market situation at its 146th (Extraordinary) Meeting, to be held in Abu Dhabi , UAE, on December 5, 2007.”
The conference also elected Dr. Chakib Khelil, Minister of Energy and Mines of Algeria and Head of its Delegation, as President of the Conference for one year, with effect from 1 January 2008, and Mr. Desidério da Graça Verissímo e Costa, Minister of Petroleum of Angola and Head of its Delegation, as Alternate President, for the same period.
It appointed Dr. Falah J. Alamri, Governor for Iraq , as Chairman of the Board of Governors for the year 2008, and, Ms. Siham A. Razzouqi, Governor for Kuwait , as Alternate Chairman for the same period, with effect from 1 January 2008.
The conference decided that its next Ordinary Meeting will convene in Vienna , Austria , on Wednesday, March 5, 2008.
Reviewing the current oil market conditions and prospects, members observed that the action taken by OPEC member countries to increase production over the preceding several years has led to a comfortable build-up in inventory levels, especially of crude.
El Badri however remarked that there was no particular price level where the organisation can say that it is comfortable, noting that “OPEC does not determine oil prices”.
On the plans by the US congress to outlaw OPEC, the Secretary-General said the bill had not been passed into law and declined comments on the ground that he would not like to speak on US internal affairs.
“We are concerned about security of supply; that is why we are investing about $140 billion on over 40 projects,” he said.
