Published On: Mon, Dec 30th, 2013

OPEC ministers see no 2014 glut amid signs of demand

Oil ministers from Organisation of Petroleum Exporting Countries’ (OPEC) three biggest members rejected the possibility of a glut in global crude supply next year amid an increase in US output and efforts by Iran and Libya to add barrels to the market.

The OPEC, which provides about 40 percent of the world’s oil, won’t need to cut production in 2014 because growth in demand can absorb the additional crude, the ministers from Saudi Arabia, Iraq and Kuwait said Monday after a meeting of Arab oil exporters in Doha, Qatar.

US benchmark West Texas Intermediate crude climbed to a two-month high on December 20, after a report showed the US economy expanded in the third quarter at a faster rate than previously estimated. WTI for February delivery rose 28 cents to $99.32 a barrel in New York.

“Do you know why WTI traded near $100 in the past few days? It’s because the market is in fear of a shortage of oil and not in fear of oversupply,” Saudi oil minister Ali al-Naimi told reporters. “The market reflects the situation.”

OPEC agreed when it last met on December 4 to keep its output target unchanged at 30 million barrels a day because the market is balanced, said al-Naimi, whose country is the group’s largest producer. Commerzbank AG said in a December 10 report that OPEC would need to reduce output should Libyan and Iranian production return to the market.

OPEC “will have to cut or accept lower prices,” Robin Mills, head of consulting at Manaar Energy Consulting and Project Management in Dubai, said. “Even if Libya and Iran don’t come back, OPEC will be under pressure.”

Exports from Libya plummeted this year as political strife and labor protests shut oil fields, refineries and ports.

The North African nation will resort to force if necessary to reopen the ports, its minister Abdulbari al-Arusi told reporters yesterday. The shutdown has cut Libyan output to 250,000 barrels a day from 1.4 million barrels a day in March.

Iran wants to raise output to 4 million barrels a day, the country’s oil minister, Bijan Namdar Zanganeh, said at this month’s OPEC meeting, after a November 24 agreement on the country’s nuclear programme opened the door to an easing of economic sanctions.

Iran pumped 2.65 million barrels a day in November, according to data compiled by Bloomberg.

Kuwaiti oil minister Mustafa al-Shemali said the group doesn’t need to change its target in the next six months as the market is expected to remain stable, “with no bumps,” until OPEC meets next in June.

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  1. Let’s put it as follows. If the market did not understand the oil market fundamentals, OPEC and the large oil firms would provide them with a Little or more-than-a-Little help. For some reason, I Think that I am going to have a problem explaining to my energy economics students in 2014 how the WTI oil price is back at $100/barrel, given all the news about the shale revolution in the US. Fortunately some of the preliminaries will be found in my forthcoming textbook ENERGY AND ECONOMIC THEORY, and the coming year should tell us much of what we need to know about the so-called ‘shale revolution’ and what it will mean for the oil price in the coming years.

  2. Nick Gjergji says:

    OPEC forecast looks right. The demand over 90 mm bbld, Middle East Problems, Africa Problems, North Sea Depletion and other, will make it hard to match the supply with the demand. Solution will be the Strategic Reserves, but this will be for short time. The befouls may play a role, and the unconventional tight oil or shale gas, will increase the liquids, but the solution are partial solutions.
    The supply will miss to match the demand, and gradually, the problem may persist, then the Strategic Reserves will decline. Coal use will increase and save some liquids which are actually used on energy industry. The “saved” liquids will be used on transport, where hydrocarbons cannot be replaced.
    The technology based on drilling, completion and gas or CO2 injection is available and if it will start application in existing conventional or unconventional tight oil reservoirs, it will make possible to match the demand on increase with supply on decrease. The know-how technology is kept on hold until the right moment will come. The right moment, means when the operation oil companies will need it, and when these companies will be ready to pay for this new technological breakthrough. Nothing comes for free, and the time is requiring the technologies which unlock oil from existing conventional reservoirs, or from tight oil reservoirs. The technology which will fulfill this duty, if required, will play the role, other ways it will be kept as know-how.
    The oil demand/supply is not only the question of the year 2014. It remains in force, with more challenges during the years to come.

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