OPEC may not raise output as demand likely to fall
Rendi A. Witular The Jakarta Post/Jakarta
In light of an expected oversupply in oil output, the Organization of Petroleum Exporting Countries (OPEC) is unlikely to agree on raising its quota during the upcoming meeting in Iran to help ease pressure on global oil prices.
Indonesian Minister of Energy and Mineral Resources Purnomo Yusgiantoro said OPEC had expected a 1.8 million barrel per day (bpd) surplus in April, as most oil-consuming countries would reduce their demand during spring time.
"I think it is best for OPEC to maintain the quota and let the market decide the price, since global oil demand may fall 1.3 million bpd in April and at the same time there is an oversupply of some 500,000 bpd," said Purnomo at the State Palace on Monday.
Purnomo said OPEC may retain its output quota at 27 million bpd during the group's meeting in Isfahan, Iran, on Wednesday -- turning down requests from several countries to raise the quota to help slash soaring oil prices.
The meeting is held to set the group's market-share and production policy.
Aside from Indonesia, other members of the cartel -- Iran, Qatar, Venezuela and Algeria -- have also announced that they would want to leave the quota unchanged.
Meanwhile, the United Arab Emirates and Kuwait suggested the group keep pumping above the quota to cool oil prices down.
Oil prices soared by about 25 percent to above $53 per barrel on average since the start of the year, on concern about rising demand and disturbance in supply.
OPEC, which pumps 40 percent of the world's oil, is producing 29.5 million bpd at present, including two million bpd from Iraq and 500,000 in over supply.
"With a significant oversupply in April amid a low demand from oil-consuming countries -- as most of them are entering the spring season -- logically, oil prices should decline," said Purnomo.
Purnomo hinted that the price of oil, which currently remained high, was more a result of speculation rather than real demand from the market.
U.S. light crude soared on Friday by 89 U.S. cents to $54.43, while Brent crude in London ended at by 44 U.S. cents higher to $53.10.
As reported by Reuters, the higher closing was mostly attributable to speculation following an announcement from the International Energy Agency (IEA) in its monthly oil market report that there would be robust growth in oil demand in the United States and China.
The IEA, which advises industrialized nations on energy policy, has revised up oil demand growth by 290,000 bpd to 1.81 million bpd this year.
For annual demand, the agency has estimated it will reach 84.3 million bpd.