RUSSIA: OPEC expects world oil prices to stabilise in a range of 45 - 55 US dollars per barrel next year

Record ID: 344490

  • Title: RUSSIA: OPEC expects world oil prices to stabilise in a range of 45 - 55 US dollars per barrel next year
  • Date: 31st October 2005
  • Summary: ADNAN SHIHAB-ELDIN OF OPEC WALKING AWAY
  • Embargoed: 15th November 2005 12:00
  • Keywords:
  • Topics: Industry
  • Reuters ID: LVA69VXG774QPK5ODM1L9E3UQDDF
  • Story Text: OPEC expects world oil prices to stabilise in a range of 45-55 US dollars per barrel next year and has ample spare capacity to meet demand, acting Secretary-General Adnan Shihab-Eldin said on Monday (October 31) at an oil conference in Moscow.
    "In terms of fundamentals of crude, they should be certainly in the range of 50, 40, 45, 55, that's the basket, there is room for prices to stabilise within such a range," Shihab-Eldin said. Global benchmark oil prices are well down from record highs touched two months ago, with U.S. light crude futures trading around 60.50 US dollars, compared with the high of 70.85 US dollars. December Brent futures are trading near 59 US dollars a barrel. OPEC's reference price for a basket of 11 crudes stood at 53.73 US dollars a barrel on Friday. "Based on fundamentals they shouldn't really continue to increase, they should moderate below the levels we have seen in recent months," Shihab-Eldin said.
    Past oil price spikes have often damaged industrial economies as rising fuel costs overtake economic growth. He said the market should be reassured about crude supplies, since OPEC has spare production capacity of 2 million barrels per day, more than enough to cover extra winter demand, and is planning to bring more on stream next year. The 11-member Organisation of Petroleum Exporting Countries offered to pump all the oil it could after Hurricanes Katrina and Rita knocked out some U.S. Gulf Coast oil refineries and hit supplies of products such as diesel and heating oil. But there were no takers, Shihab-Eldin said, showing that there was already enough crude oil to meet demand.
    "We don't think that the call on OPEC will rise significantly next year. In fact, it will stay at the same level, and so we will still have the spare capacity of two million barrels a day, and it will build up as a result of additional capacity that is being brought on stream next year from a number of OPEC countries, including Saudi Arabia and Emirates and others," he said. He said the system has to rebalance itself between the upstream and the downstream and between the quality of crude available and the configurations of the refineries available. The availability of crude and shortage of refining capacity have boosted profits in the refining sector, which suffered from overcapacity and low margins for years, and many plants are running at full tilt. Among those seeking to make the most of the high refining margins is the Russian government, host of the Moscow conference where Shihab-Eldin was speaking, which is using tax incentives to encourage upgrades of Soviet-era refineries.
    Industry experts say Russia's high tax on crude oil exports makes domestic refining more profitable than selling crude directly onto world markets, so refiners are rushing to upgrade their plants to get more refined products out of each barrel.
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