OPEC to Consider New Price Band
As oil prices hit $48 per barrel
By Mike Oduniyi with agency report
As crude oil prices continued on the upward swing, the Organisation of Petroleum Exporting Countries (OPEC) said it would consider a new price band when member countries meet next month.
OPEC oil ministers met in Vienna, Austria on Septmeber 14. OPEC has used the price band since 2000, as a guide for its intervention in moderating oil prices. Oil prices continued on the upward trend yesterday with the light crude closing above an unprecedented $48 per barrel.
OPEC President Purnomo Yusgiantoro said yesterday that the group will discuss another price band at its meeting but added that the range of the new price band was not yet known as members have yet to submit proposals.
OPEC's current price range is between $22 and $28 a barrel, at which it can either increase production by 500,000 barrels per day (bpd) if the price went above the band or cut production by same volume if price fell below.
OPEC's basket of seven crudes was already at a new record high of $42.07 per barrel on Wednesday--more than $14 per barrel above the $28 per barrel top end of the official $22-28 per barrel target band.
OPEC said production by its 10-member countries including Nigeria, is expected to reach 30 million bpd this month and could increase to 30.5 million in September, all in the bid to check rising oil prices.
According to OPEC, the high prices are being driven by squeezes in the so-called upstream sector-exploration and production - and downstream activities such as oil refining, whether tight conditions are real or simply perceived as such.
The latest surge in crude prices, traders said, was linked to shrinking U.S. inventories which heightened supply worries. U.S. commercial stocks of crude oil declined by 1.3 million barrels last week to 293 million barrels as refiners ramped up production, the U.S. Department of Energy's Energy Information Administration reported.
The inventory decline was broadly in line with analysts' expectations, but coming as it did amid lingering supply fears, it prompted traders to bid up futures.
OPEC governor Hossein Kazempour Ardebili said the group has done all it can to try to curb the relentless surge in oil prices which are likely to continue to be boosted by uncertainty over future oil supplies.
Kazempour said he believes markets were being oversupplied by as much as 2.8-mil b/d in the third quarter and 1.8 million b/d for the year as a whole.
"I think OPEC has already done more than market expectations," he said.
"It has oversupplied the market. This oversupply is reflected in increments in stocks--crude, products and the SPR--in the US," he said. "So the ball is not in OPEC's court any more."
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