OPEC remains concerned at falling oil price
Fitri Wulandari, The Jakarta Post, Jakarta
The Organization of Petroleum Exporting Countries (OPEC) remains concerned at the likelihood of a declining oil price in the second quarter of this year when demand for heating fuel falls off.
OPEC President Purnomo Yusgiantoro said demand for the fuel was expected to drop by 2.2 million barrels per day (bpd) to 2.4 million bpd.
"If (the oil price drop) materializes, we shall take measures to keep the price at US$22 to $28 at the end of March," Purnomo, who is also Indonesia's Minister of Energy and Mineral Resources, told a media conference on Tuesday.
OPEC, which produces a third of the world's oil, is scheduled to meet on March 31 in Vienna to discuss production policy.
OPEC ministers decided on Feb. 10 to reduce official output limits by one million bpd from 24.5 million bpd to 23.5 million bpd, starting from April 1, excluding Iraq. It aims to avoid a price collapse in the second quarter when demand for oil falters as winter comes to an end in the northern hemisphere.
Oil prices continued to climb on concern at tight gasoline supply in the U.S. ahead of summer demand.
On Monday, U.S. Light crude for April traded up 19 U.S. cents at $34.54, Reuters reported. Brent Crude for April on the International Petroleum Exchange in London climbed 14 U.S. cents to $30.95.
Purnomo said the rising oil price was partly due to a longer winter in the northern hemisphere, which had prompted stronger demand.
Security disturbances in Iraq had also contributed to the high price.
"Security problems in Iraq have disturbed the country's oil production. It is not clear when Iraq will achieve its 3 million bpd target," Purnomo said.
Iraq currently produces 2.1 million bpd.
Purnomo said OPEC members could still produce oil above quota as long as oil prices remained above $28 per barrel for two more consecutive weeks.
"OPEC's basket price is still above $28 per barrel, and it means (if it stays above $28 per barrel), for two consecutive weeks OPEC (members) would be allowed to produce above the quota to bring the price below $28 per barrel," Purnomo said.
OPEC's reference crude oil price, or basket of crude oil, was at $30.17 per barrel on Friday. The price has been above $28 per barrel since December 2003. OPECs basket of crude is an index of seven oil grades.
Purnomo said OPEC would seek measures to keep its basket price within the price band $22 to $28 per barrel.
The price band mechanism aims at maintaining the oil price range by raising production by 500,000 barrels per day if the basket price stays above $28 barrel per day for 20 consecutive trading days. OPEC could lower output by a similar amount if the price stayed below $22 per barrel for 10 consecutive trading days.