Oil prices likely to increase until end of this year
JAKARTA (JP): Oil prices will likely continue increasing until the end of this year due to the world's strong demand and stable output by the Organization of Petroleum Exporting Countries (OPEC), a former secretary general of the group says.
"I am optimistic that oil prices at the rest of this year will be higher than US$16 but slightly lower than $21 per barrel, the price level targeted by OPEC," Subroto announced yesterday before speaking at a three-day petroleum conference at the Jakarta Convention Center.
The conference, annually organized by the Indonesia Petroleum Association (IPA), was opened by Vice President Try Sutrisno.
Around 2,000 participants are attending the 23rd conference, which carries a theme of "Strategic Management of Technology and Resources, Keys to the Survival and Growth of the Oil and Gas Industry."
Subroto said that the robust oil market is mainly caused by recoveries of the OECD (Organization for Economic and Cooperation Development) economies.
"With more uniform economic growth in the United States, Europe and the Asia-Pacific region, the underlying oil demand increase will be substantially higher," he said.
He noted that as of August, the total world demand for oil reached 65.79 million barrels per day (bpd), reflecting an increase of 690,000 bpd, or 1.1 percent over 1993.
"But we should thank the OPEC members, which have shown their strong compliance with production ceilings, thereby keeping the price stable over the last few quarters," he said.
"This (compliance) has been the longest record of OPEC keeping production very close to the production quota and keeping 1994 prices relatively firm," he added.
OPEC's production averages 24.61 million bpd, compared to its ceiling of 24.52 million bpd.
On Monday, the average price of OPEC oil was $16.59 per barrel, compared to $16.50 in June and $17.31 in July. For comparison, the price of Brent was $16.90 in August, $17.09 in June and $18.05 in July; the price of the West Texas Intermediate was $18.33, $19.07 and $19.64 respectively.
Rollover
Talking about the market outlook for 1995, Subroto suggested that OPEC decide to roll over its production ceiling until the first semester of next year during its three-day ministerial conference in Bali which begins on Nov. 21.
"Preferably OPEC should keep the present production level until the second quarter of 1995," he said.
OPEC's secretariat has predicted that the total world demand for oil in the first quarter of 1995 will increase by 770,000 bpd to 67.79 million bpd from the same period of this year, he said.
"For the second quarter of 1995, the demand is estimated at 65.07 million bpd, an expansion of 890,000 bpd or 1.4 percent over the second quarter of this year," Subroto said.
"The demand for OPEC oil is estimated at 26.70 million bpd and 24.35 million bpd for the first and second quarters, respectively," he added.
He said that the rollover policy is based on Iraq's return to the world's export market.
"If Iraq enters the market, it will be capable of supplying 700,000 bpd," he said, adding that this will likely cause on oversupply on the world market and push down prices.
He said the relevant question for the upcoming Bali meeting is: "Will they maintain their output below the expected call for their oil for some months, in order to accommodate Iraq's return to the oil market, without a substantial cut-back to their production, which is politically a difficult decision to take."(fhp)