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'Now is the time for OPEC to raise output': CGES
CGES Monthly Oil Report Mar 2007
AFP
LONDON
Petroleumworld.com 04 24 07
Reduced production by OPEC oil exporters risks causing another damaging oil price spike this year, an influential energy consultancy warned on Monday.
The Centre for Global Energy Studies (CGES) urged the 12-member OPEC cartel to raise production to help lower prices and avoid another shock on the oil market during the northern hemisphere summer.
"If OPEC really wants the stable market it claims to seek, now is the time to raise output," the CGES monthly report for April said.
"OPEC should no longer be concerned about prices falling, but about avoiding another spike."
The warnings from CGES echo promptings from the International Energy Agency, an energy watchdog for consumer countries, which has also pressed OPEC to increase production in the last few weeks.
The IEA said in its monthly report for April that OPEC output in March was at its lowest level since January 2005.
The OPEC-11 grouping, which excludes production from recent member Angola, has cut its production by more than 1.5 million barrels per day since last August, CGES said.
The most recent output cuts by OPEC, in November and February, have helped oil prices to rise nearly 30 percent since mid-January when crude dipped to just below 50 dollars per barrel in New York.
"OPEC appears to have successfully averted the risk of a heavy fall in oil prices by means of its production cut over the winter.
"It now has to face up to the challenge of avoiding a repeat of last year's price surge during the summer months by raising output," CGES said.
CGES said that the Organisation of Petroleum Exporting Countries had underestimated oil supply from non-OPEC countries this year, potentially causing a shortage of supply.
The price of oil hit a record near 80 dollars per barrel last year because of geopolitical uncertainty caused by the war between Israel and the Lebanese Shiite militia Hezbollah.
OPEC sees the world needing production of 30.3 million bpd in order to leave stocks unchanged, while the CGES believes it would need 30.7 mln bpd.
"This difference (of 400,000 bpd) could create, or avoid, a repeat of last year's damaging price spike," the report said.
Oil is currently trading at around 67 dollars per barrel in London and 64 dollars in New York.CGES added that the high level of oil prices had already begun reducing demand.
High prices encourage investments to increase energy efficiency and alternative sources of power.
" Global oil demand growth has slowed in response to high oil prices and global economic growth might well weaken," said the report."Inflationary pressures are beginning to mount in oil-consuming countries, leading to interest rate rises and a general economic tightening," added the CGES.
AFP 23 1614 GMT 04 07
Copyright© 2007 AFP. All Rights Reserved.
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