OPEC today decided to keep oil production at a near 25-year-high but withdraw an emergency offer of spare capacity because the energy market is well supplied and prices are stable.
The powerful 11-nation Organisation of the Petroleum Exporting Countries also said it would meet again on January 31 in Vienna to assess a seasonal drop in demand for energy, with a possible cut in output on the cards. The widely-anticipated decision came at the end of a one-day meeting in Kuwait City.
OPEC's official production quota of 28 million barrels a day 'will be adequate, if fully observed, to balance the market for the first quarter of the year,' it said in a statement.
As a result, actual production will remain at some 30 million bpd when Iraq's contribution is included. The war-torn country has been excluded from the group's quota system since 1990.
The announcement helped limit a rise in the price of oil in New York that was triggered by a forecast of cold weather in the US. New York's main contract, light sweet crude for delivery in January, rose 47 cents to $59.86 a barrel in electronic trading.
Turning to the emergency pledge of two million bpd in extra capacity offered in September, OPEC president Sheikh Ahmad Fahd al-Sabah said the measure would not be renewed after it expires at the end of 2005. The three-month spare capacity was designed to meet demand after hurricane disruption to US output, but so far there have been no takers.
Ministers chose to wait until the end of next month to address the traditional slump in demand for energy in the second and third quarters sparked by warmer weather in the industrialised northern hemisphere.
Analysts predict the group will have to lower its production ceiling before March to counter waning demand and a knock-on drop in prices. As for the sensitive issue of oil prices, OPEC repeated a call on consumer countries to invest more on refineries, noting that a shortage of such facilities was driving up the price of oil and not a lack of supply.
The price of oil hit an all-time high of $70.85 a barrel in New York on August 30 following Hurricane Katrina, which devastated refining and crude production facilities along the Gulf Coast of the US.
In a further bid to reassure the market that there is plenty of oil, the cartel agreed to start publishing members' plans to increase capacity. With most countries pumping at full-power already, only Saudi Arabia has the power to turn up the taps. But OPEC plans to increase its overall capacity to 38 million bpd by 2010.
OPEC, which produces about 40% of world oil, comprises Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.
Meanwhile, the US government has dramatically lifted its long-term forecast for oil prices but said the US' dependence on foreign energy should go up only modestly.
In its Annual Energy Outlook 2006, the government's Energy Information Administration (EIA) predicted that based on 2004 values, a barrel of imported light, low-sulphur crude oil would fall to about $47 in 2014. But prices would then rise to $54 a barrel in 2025 and $57 in 2030, it said.
The projected crude oil price in 2025 was about $21 higher than projected in the 2005 EIA outlook report. 'As a result of both supply and demand changes, growth in petroleum imports is expected to be less than projected last year,' it estimated.
Net petroleum imports met 58% of US oil demand in 2004. They are projected to meet 60% of demand in 2025, much less than the figure of 68% forecast in the previous report.
The higher world oil prices predicted in the new report should boost domestic crude oil production and increase the demand for 'unconventional sources' of vehicle fuel such as ethanol and biodiesel, the EIA said.
They would also lower growth in US energy demand, for instance by depressing sales of gas-guzzling light trucks and sport utility vehicles, while boosting sales of hybrid and diesel vehicles, it said.
