Oil producer-group OPEC is considering an increased spare capacity to counter worries of slowed Iraqi exports during the greatest demand for petro in 24 years.
The Organization of Petroleum Exporting Countries (OPEC) is estimated to be pumping close to 30 million barrels per day (bpd), its highest level since 1979, in an attempt to lessen this year's oil price surges. Despite some infrastructure problems from the world’s major producers, oil prices are still 33 percent higher than at the end of 2003.
The 11-member OPEC cartel meets September 15 in Vienna to review its output policy. Suggestions that OPEC would further increase spare output capacity helped fuel a decline in US oil prices Monday.
“In response to expected demand growth in the near future, member countries have plans in place to further increase production capacity by around one million barrels per day towards the end of this year and into 2005,” OPEC president Purnomo Yusgiantoro said in a written statement, according to wire reports.
Saudi Arabia is the only OPEC participant that currently has significant spare capacity within the producers' cartel.
World supplies are struggling to keep up with the surge in demand while eliminating any hiccups in the supply chain. Through much of the summer, oil prices have been extremely volatile, increasing fears of supply disruptions in producing nations such as Iraq, Russia and Venezuela. Yet, President Vladimir Putin assured U.S. leader George W. Bush last week that Russia, the world's second-biggest exporter, would not allow overseas sales to fall at a time when oil prices were hovering close to historic highs.
U.S. light crude futures closed down 90 cents or 2.1. percent Monday at $42.28 after slipping as low as $41.30 per barrel in New York. This was down 15 per cent from the record closing high of $48.70, hit on August 19.
Yusgiantoro said OPEC is doing everything possible to stabilize exorbitant oil prices, but he said that reduced 'geopolitical tensions' are needed to reduce prices long-term.
Turmoil in Iraq and frequent attacks on petroleum infrastructure have been major factors in the sharp rise in crude prices this year. Fire fighters on Sunday battled to extinguish a South Rumaila oilfield blaze after spilled oil and gas from sabotaged pipelines ignited.
As a result, Iraq’s exports operated at a reduced rate of 1.4 million bpd on Monday, compared with two million bpd a week ago. Oil prices fell even as senior officials at the country’s state-run oil company said they weren't likely to bring the exports to full capacity without a week of pipeline repairs.
Also pressuring prices is the looming end to the summer vacation driving season, which traditionally ends on the Labor Day weekend. The conclusion typically means a decline in motorist demand for gasoline.
