Market oversupplied by 2 million bpd: OPEC chief
Market oversupplied by 2 million bpd: OPEC chief
Fitri Wulandari, Jakarta
The Organization of Petroleum Exporting Countries (OPEC) said
on Sunday that the soaring of oil prices to historic peaks was
not caused by a shortage because the market already had an ample
supply.
"The world is oversupplied by 1.5 million barrels per day
(bpd) to 2 million bpd; the figure fluctuates from time to time.
But the problem is not based on the supply-demand balance," OPEC
president Purnomo Yusgiantoro said.
He said non-fundamentals were the factors still dominating the
recent rally in oil prices.
Oil prices breached fresh peaks of US$46 per barrel on Friday,
fueled by fears over supply disruption following heightened
tensions in Iraq and political turmoil in OPEC's third-largest
producer, Venezuela, ahead of Sunday's referendum to determine
the fate of incumbent president Hugo Chavez.
The financial crisis at Russia's oil producer giant Yukos has
added to fears. Russia is the world's second-largest oil producer
after Saudi Arabia but is not a member of OPEC.
While expressing concern at high oil prices, Purnomo said,
OPEC had helped to cool the price by pumping an extra 2 million
bpd of its quota, bringing its output to a total 30 million bpd.
Purnomo said the group might still have spare capacity of up
to 2 million bpd but it still had to be verified.
"We are still checking with OPEC members to see if they still
have spare capacity. We shall discuss it at September's meeting,"
Purnomo said.
OPEC is scheduled to meet in Vienna on Sept. 14 to discuss its
quota policy.
Purnomo said, however, crude oil prices might ease to $30 per
barrel next year as political turmoil in Venezuela and Iraq, as
well as the financial crisis in Yukos, were expected to be
resolved.
"There is a psychological premium in the market of $15 per
barrel because of Yukos, Iraq and Venezuela. If the premium can
be eliminated, oil prices will be down to $30," Purnomo said.
Purnomo said OPEC would meet non-OPEC nations and ask them to
raise output to cool surging oil prices. High oil prices could
further damage the world oil market.
The oil price hike has also sparked concern at home of a
heavier burden on the state budget as the government will have to
allocate a greater amount in funds for the fuel subsidy. The
country still imports some of its fuel needs.
The government decided not to raise fuel prices to avoid
social unrest during this election year. It maintains a subsidy
for certain types of fuel, particularly those that are used by
the transportation sector and low-income households.
The current state budget assumes an average oil price of $22
per barrel. However, if prices average $35 per barrel for the
whole year, the subsidy is expected to rise to Rp 56.90 trillion,
triple the initial budgeted amount of Rp 14.5 trillion.
This will bring additional deficit to the state budget of Rp
1.5 trillion to Rp 2 trillion. It means the government is
unlikely to achieve its target deficit of 1.2 percent of gross
domestic product, or Rp 24 trillion.
Purnomo, however, said that additional deficit up to Rp 2
trillion was manageable.
"We'll start belt-tightening measures, so the deficit is
manageable. Besides, there is expenditure that can be delayed to
compensate (for the high spending in fuel subsidy)," he said.