Oil demand offsets increased supply

Oil demand offsets increased supply

SINGAPORE (Reuter): Former OPEC Secretary General Subroto said yesterday world oil prices could fluctuate by US$1.00-$1.50 if Iraq starts exporting 700,000 barrels per day under UN resolutions.

Speaking on the sidelines of a chemical conference in Singapore, Subroto said oil demand was expected to rise 1.2 to 1.3 million bpd in 1996, which would help to absorb Iraq oil.

"We expect demand to continue to increase. This will mean that the 700,000 bpd can be accommodated by OPEC," he said. "So we will not see a drastic change in prices.

"It will fluctuate but not so drastically. The fluctuation will be in the range of $1.00 to $1.50."

Subroto was speaking to Reuters and two magazine journalists. International benchmark Brent crude was trading at $17.75 a barrel yesterday for April deliveries.

Iraq was banned from exporting oil after it invaded Kuwait in 1990. However, it entered negotiations earlier this month with the United Nations concerning Resolution 986 which would allow oil sales worth $2 billion over six months, the equivalent at current prices of about 700,000 bpd.

Subroto, secretary general for a six-year term which ended in June 1994, said Iraqi production on top of the OPEC quota total would still be less than members were actually producing.

Production by members of the Organization of Petroleum Exporting Countries in January was 25.70 million bpd, more than a million barrels above its long-held ceiling of 24.52 million barrels.

Another option for OPEC would be a pro rata cut, but he had doubts about the success of such a move.

"This (would be) something difficult for Saudi Arabia, Kuwait and the UAE, (who) have strictly followed their quotas,' Subroto said.

Even a return to pre-Gulf War quotas was unlikely, Subroto said. He said Saudi Arabia would have to cut its quota to 5.0 million bpd from 8.00 million bpd, which was unlikely.

Subroto said he expected stable oil prices in the longer term. He predicted Brent would trade around $18.00 per barrel to the end of the decade.