The Organization of Petroleum Exporting Countries won’t need to raise oil production this year as its output of natural gas liquids increases, the International Energy Agency’s deputy executive director said.
“We don’t see a big change in OPEC production this year,” Richard Jones said in an interview late yesterday in Abu Dhabi. “First, non-OPEC production is going to go up, modestly. But the big difference is that OPEC’s production of natural gas liquids increases, by 800,000 barrels a day.”
OPEC announced an unprecedented series of production cuts in late 2008 amounting to 4.2 million barrels a day in response to collapsing global demand. Its commitment to that target faltered last year as prices rebounded by 78 percent. Crude oil has lost 1.4 percent this year and was at $78.27 a barrel on the New York Mercantile Exchange at 11:44 a.m. in Singapore.
“We think the fundamentals are comfortable, which basically means prices will keep bopping along,” Jones said. “OPEC spare capacity is at a pretty high level, OECD stocks are at a high level of almost 60 days of forward cover, and you can’t rule out chance events such as the recent cold snap in developed countries that sent prices up a little bit.”
Oil demand will rise by 1.4 million barrels a day this year, to 86.3 million barrels a day, Jones said. This is up 1.7 percent, or 1.44 million barrels a day, from 2009.
By adding output of natural gas liquids, which can be made into fuels of petrochemical feedstocks, OPEC can boost its revenue and “stay within the margins of their agreements” on crude oil, Jones said. “What we’re basically saying is that what OPEC was producing in December is about the average they have to produce in the coming year.”
Non-OPEC producers, accounting for about 60 percent of the global total, will provide 51.5 million barrels a day in 2010, the Paris-based adviser to 28 nations said in its monthly report Jan. 15.
Higher than expected supplies from Norway and Brazil will offset weaker Canadian and Malaysian output in 2010, according to the IEA. Norway expects crude production to fall 6 percent this year, the country’s Petroleum Directorate said today.
OPEC, which agreed at a meeting in Angola last month to maintain production targets, continued to increase supplies in December, reducing its adherence to output quotas.
OPEC crude output averaged 29.1 million barrels a day last month, 75,000 barrels a day more than in November, according to IEA estimates. The 11 members bound by production quotas boosted supplies by 100,000 barrels a day, meaning compliance with production quotas slipped to 58 percent last month from 60 percent in November, according to the agency.
OPEC is unlikely to increase output this year because the market is sufficiently supplied, Qatar’s Energy Minister said.
“I don’t think we will increase production this year” Minister Abdullah bin Hamad al-Attiyah told reporters in Abu Dhabi yesterday. “Because I think the market is very efficient, there is no shortage in supply. There is no indication why we should increase supply.”
OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Iraq is exempt from the quota system.