Oil price to remain strong: Kuntoro

JAKARTA (JP): Minister of Mines and Energy Kuntoro Mangkusubroto said on Monday he was optimistic international oil prices would remain strong at an average of US$16.40 per barrel through to the end of the year, with members of the Organization of Petroleum Exporting Countries (OPEC) adhering to their production ceiling quotas.

"We hope the price level will prevail through to the end of the year," Kuntoro said after a meeting with President B.J. Habibie at the state palace.

He ascribed the recent improvement of oil prices to the adherence of OPEC's members to the ceiling on output agreed upon by the organization in Vienna in March.

"The level of adherence by OPEC members to the output quotas now reach 88 percent," He said.

OPEC members decided to reduce their output by 1.7 million barrels per day (bpd) from April 1, and non-OPEC producers said they would reduce their output by about 400,000 bpd.

Kuntoro said OPEC's output currently stood at 22.97 million bpd or 35 percent of the global oil output of between 74 million and 75 million bpd.

Kuntoro said that at present the world's oil demand exceeded the supply, adding he was optimistic the situation would persist for many months to come.

He said that aside from the cut in output by OPEC members, the world's oil supply also declined due to the closure of many oil wells in non-OPEC oil producing countries, including the United States, following the sharp drop in oil prices.

For instance, he said, oil companies in Texas closed down thousands of oil wells several months ago when the price of oil fell to below $10 per barrel, lower than their production costs.

The International Energy Agency (IEA), which was formed by developed nations in the 1970s to monitor crude oil markets, raised on Friday its estimate for world oil demand this year on improved Asian prospects.

IEA also said OPEC countries were respecting their output ceiling quotas.

"Global oil production fell by 400,000 barrels a day to 73 million barrels in May, driven by a cut in OPEC crude production," the IEA said in its monthly oil market report.

It said OPEC compliance with the cutback agreements "reached 90 percent (in May), up from a revised 82 percent in April".

The IEA data suggest that some OPEC members are more diligent at cutting production than others. Saudi Arabia, Venezuela, Kuwait and the United Arab Emirates have fulfilled 90 percent or more of their pledged cutbacks.

Qatar and Indonesia have kept pumping almost as if the agreement did not exist, the report said.

Kuntoro earlier said Indonesia adhered to its output quota of 1,187 bpd.

Indonesia expects Rp 12.4 trillion in oil revenue in the 1999/2000 fiscal year, based on the oil price projection of $10.50 per barrel.(prb/jsk)