Oil price to slide with output increase

JAKARTA (JP): Secretary-general of the Organization of Petroleum Exporting Countries (OPEC) Rilwanu Lukman was upbeat OPEC members would be able to pump an additional 800,000 barrels per day (bpd) into the market next month and the oil price would, thereafter, start going down.

He said he did not expect the oil price to reach US$40 this winter, as feared by many.

"We are ready to produce more and put more and more oil (into the market) and it (the price) will go down.

"The real period to watch is the second quarter of next year. In the second quarter of next year, the price may weaken because, traditionally, consumption is less," Lukman said.

OPEC decided this month to increase its output by 800,000 bpd starting Oct. 1 to lower the soaring price, but some analysts doubt OPEC's ability to raise their output to the level as production in some member countries has reached its limit.

Lukman was confident OPEC would be able to reach the new quota despite production constraints in some member countries.

"Some countries are approaching their limit, but as a group we have a capacity of two million bpd," Lukman told reporters on the sidelines of the Indonesian International Oil, Gas and Energy Conference and Exhibition (IIOGE).

With the new quota, Indonesia, which currently has a quota of 1.317 million bpd, is allowed to pump another 41,000 bpd.

The government, however, has said that it might take up to six months for Indonesia to reach its new quota.

Kuwait has also said it would not be able to pump more oil as its production was already at full capacity.

High fuel demands have raised international crude oil prices to over $30 a barrel, far above OPEC's own price target of between $22 to $28 a barrel.

Fearing inflation and a possible slowdown in economic growth, developed countries have pressured OPEC to release more oil.

"The organization's member countries have committed some 3.2 million bpd of crude to international markets, in a bid to take the heat out of prices," Lukman said at the conference.

However, he said, prices remained "stubbornly" high, primarily because of market speculators.

"Make no mistake, there is a balance between supply and demand -- meaning that OPEC is producing enough crude to satisfy the global thirst," he said.

"International oil trading has grown to become a cut-and- thrust, jittery institution that can create boom or bust situations simply through psychology and speculation and trading in what we call "paper barrels"," he said.

According to him, mere reports on low crude stocks and continued soaring prices had created a hype that drove crude prices to record heights in 10 years.

"What we desperately need to do is rid the markets that control our future of these conveniently invented scenarios, which are proving to be a real threat to the fabric of the entire industry," he said.

He also criticized industrialized countries for pressuring OPEC to hike its oil output, while fuel taxation in these countries reached as high as 80 percent on the oil sold.

Quoting Italian Prime Minister Giuliano Amato, Lukman said that industrialized countries did little to help oil producers in developing countries when oil prices sank as low as $10 in 1999.

Lukman called it unfair that the industrialized countries, which benefit from fuel taxation, demand cheap oil for their industries, while telling oil producing developing countries to cut their oil revenue. (bkm)