OPEC Considers Urgent Meeting as Saudis Create New, Low-Sulfur Oil Blend
OPEC members are discussing whether to hold an emergency meeting to consider increasing oil production, Kuwait’s oil minister said.
“I’ve talked to Abdalla El-Badri in this regard, and he is calling everybody and making a consensus on whether we’ll need an OPEC meeting, an urgent meeting,” the Kuwaiti minister Sheikh Ahmad al-Abdullah al-Sabah told reporters in Kuwait City today. El-Badri is the secretary general of OPEC. “We have to find out at the meeting whether there is a need for an increase or not,” the Kuwaiti minister said.
In another effort to cope with cuts in oil exports from Libya amid worsening turmoil there, Saudi Arabian Oil Minister Ali al-Naimi said his country is developing a blend of light, low-sulfur crude to help offset a shortage.
Saudi Arabia and other members of the Organization of Petroleum Exporting Countries have pledged to ensure adequate supply to the market amid violence in Libya, Africa’s third- largest crude producer. OPEC, which supplies 40 percent of the world’s oil, is under pressure to rein in fuel prices after New York-traded oil rallied yesterday to $105.44 a barrel, the highest closing price since September 2008.
Asked if the market needs more oil from OPEC, the Kuwaiti minister said: “Not yet.” Questioned whether Kuwait will raise production by April, he replied: “It depends on the meeting, it has to be a collective decision.”
Saudi Arabia, OPEC’s biggest producer, has added to crude stockpiles at storage facilities in Sidi Kerir, Egypt, Rotterdam in the Netherlands and Okinawa, Japan, to help meet demand swiftly, the official Saudi Press Agency reported, citing al- Naimi. Saudi Arabia has 3.5 million barrels of spare capacity, he said.
Al-Naimi said Saudi Arabia is developing a blend of light, low-sulfur crude and will help meet any increase in demand, Saudi Press Agency reported. The Saudis are creating the new blend to help offset lost barrels of similar crude from Libya.
“The Kingdom has taken steps to develop a special crude oil blend which is closer in quality to the supplies which have been lost by utilizing mixes from its different fields,” the report quoted al-Naimi as saying. The mixes used in this new blend are lighter in gravity and lower in sulfur, “helping to minimize crude-quality concerns,” he said, according to SPA.
Spare Saudi Capacity
Saudi Arabia’s 3.5 million barrel-a-day spare capacity is available to help offset supply shortfalls, and the excess includes a mix of crude grades and allows his country to meet a broad range of needs, he said.
Libya has cut output by as much as 1 million barrels a day, according to the International Energy Agency. The North African country pumped 1.39 million barrels a day on average in February, down from 1.59 million the previous month, according to Bloomberg estimates. Still, exports continue from some parts of the country, including the eastern port of Tobruk, Libyan oil company officials said yesterday in Benghazi.
OPEC currently has no meeting planned aside from a conference already scheduled for June 8 in Vienna, according to an OPEC official.
An emergency meeting can be called by the group’s secretary general in consultation with its president, according to the OPEC Statute. Iranian Oil Minister Masoud Mir-Kazemi, who currently holds the OPEC presidency, said on Feb. 28 that there is no need for OPEC to increase supply, the state-run Islamic Republic News Agency reported.
Muted Impact Seen
Some OPEC members and producers outside the group have made up for the reduction in crude shipments from Libya, Qatari Energy Minister Mohammed Saleh al Sada said. “There was hardly any effect” on supply because of the Libyan unrest, he said at a conference in Doha.
Goldman Sachs Group Inc. raised its average second quarter New York oil-price forecast to $99 a barrel, up $4.50 from its previous estimate, as an increase in production by Saudi Arabia and supply halts in Libya reduce OPEC’s ability to make up for further disruptions.
OPEC has idle capacity of less than 2 million barrels a day, down from 3 million in December, the bank said. Saudi Arabia is producing more than 9 million barrels a day, or 700,000 barrels above the official figure for January, according to Goldman.
Risk of Disruption
“The real risk is that the remaining spare capacity cannot accommodate an escalation in disruption,” analysts led by David Greely in New York wrote in the report. “The current developments in Libya have therefore brought forward the drawdown of OPEC spare capacity by about six months.”
Demonstrations have toppled leaders in Tunisia and Egypt and there have been protests in countries including Iran, Yemen and Oman. Websites in Saudi Arabia have called for a nationwide “Day of Rage” on March 11 and March 20, according to Human Rights Watch.
Even before the Libyan unrest, most OPEC members were producing more than their individual quotas. Daily output from the 11 members bound by quotas was 27.01 million barrels a day in January, according to the latest monthly report from the group’s Vienna-based secretariat, implying that compliance with the cutback had declined to 48 percent.
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