|OPEC to maintain current production levels
|Spare capacity offer withdrawn as market is well supplied
OPEC decided Monday to keep production levels unchanged and withdraw an emergency offer of spare capacity because the oil market is well supplied and prices are stable, ministers said.
The 11-nation Organization of the Petroleum Exporting Countries (OPEC), however, will meet again on January 31 in Vienna to assess an expected drop in demand for energy, with a possible cut in output on the cards, they added. The widely-anticipated decision came at the end of a one-day meeting in Kuwait City.
Libya's Energy Secretary Fathi Hamed bin Shatwan summed up the agreement to leave OPEC's official production quota at 28 million barrels per day (bpd).
"Everything as it is," he told reporters.
As a result, actual output by the cartel will remain at some 30 million bpd when Iraq's production is included. The war-torn country has been excluded from OPEC's quota system since 1990.
Concerns about a colder-than-usual winter lifted the price of Brent North Sea crude for January delivery which gained $0.45 to $57.76 per barrel in London trading Monday.
OPEC president Sheikh Ahmad Fahd al-Sabah said the emergency pledge of 2 million bpd in extra capacity to the market would not be renewed after it expires as scheduled at the end of the year.
"We decided not to renew the 2 million (offer)," said Sheikh Ahmad, who is also Kuwait's energy minister.
He noted, however, that the group remained ready to re-introduce the measure if necessary.
"Like always, OPEC will be ready and grateful to help the market whenever there will be a shortage of supply." The three-month spare capacity was created in September to meet demand - if necessary - in the wake of hurricane disruption to U.S. output, but so far there have been no takers.
Sheikh Ahmad also explained the reason to hold another meeting next month.
"We decide that we can have a meeting at the end of January 31 in Vienna to monitor the market and to know exactly what will be the situation of the second quarter," he said.
Ministers are concerned about a traditional drop in demand for oil in the second and third quarters of 2006 because of warmer weather in the industrialized north-ern 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.
Libya's bin Shatwan and Qatar's Energy Minister Abdullah bin Hamad al-Attiyah hinted at such an outcome if demand fell too far.
"We may discuss a cut," bin Shatwan said. "In the second and third quarters, usually demand decreases, so we have to meet and discuss, and we're going to have a cut if it is necessary." Qatar's Attiyah added: "The market now is over-supplied. Traditionally, in the second and third quarters, the consumption is lower, so if there is a need, we will cut [production]." Weaker demand over this period, however, has been less of a factor in the past two years because of growing energy needs in fast-growing economies such as China and India.
Algeria's Energy Minister Chakib Khelil said earlier that a harsh winter would also trigger the need for another meeting to assess the market situation.
"If winter time is going to be pretty bad then I think it will be a good idea for OPEC to meet to see what we can do to stabilize the market at that stage because then it will be in a very tight situation," he said.
Bad weather increases demand for oil, putting pressure on OPEC's limited production capacity.
With most members pumping at full-capacity already, only Saudi Arabia has the power to turn up the taps.
The price of oil hit an all-time high of $70.85 per barrel in New York on August 30, following Hurricane Katrina, which devastated refining and crude production facilities along the Gulf Coast of the United States.
OPEC, which produces about 40 percent of world oil, comprises Algeria, Indonesia, Iran, Iraq, Kuwait,
Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.
Kuwait, hosting the 138th OPEC conference, has only played host to such a meeting by the cartel twice. The last time was in 1966.
The Daily Star