US increases forecast on crude oil price
By Kevin Morrison and Javier Blas in London
The EIA report said: "The chances for even a gradual, sustained decline in crude oil prices through 2005, as previously projected, seem to have diminished." Guy Caruso, chief executive, told Congress yesterday: "While our forecast has crude oil prices easing slightly through third quarter the world market will still be tight as world petroleum demand picks up seasonally in the fourth quarter, increasing potential for unexpected upward price pressure [on oil] this winter."
The EIA's upward revision came as Ali al-Naimi, the Saudi Arabian oil minister, said in an interview that members of the Organisation of Petroleum Exporting Countries gathering for their next meeting in Vienna on July 21 would go ahead with their plan to increase Opec's output quota. This would result in a quota increase of 500,000 barrels a day to 26m b/d from August 1.
Mr Naimi's comments, to the Middle East Economic Survey, were seen as an attempt by the most powerful oil minister within Opec to cool oil prices, which moved to within striking distance of $40 a barrel on Tuesday for the first time in just over a month, before falling 65 cents to $39 yesterday.
Saudi nervousness resurfaced after a week in which oil prices have climbed by 12 per cent after having fallen to two-month lows. US crude futures are trading about $39 a barrel, well above the $25 level that Mr Naimi said was a reasonable price for both consumers and producers. It has been more than nine months since Saudi Arabia or other Opec producers received prices as low as $25 for their crude oil.
Although Mr Naimi also told MEES that Saudi Arabia remained committed to the official $22 to $28 a barrel Opec price range, most of the cartel's remaining members are seeking to raise the price band.
Kuwait, a strong US ally, yesterday added its voice to the chorus when Sheikh Ahmad Fahad al-Ahmad al-Sabah, the country's oil minister, who is visiting China, told Dow Jones in Beijing that $28 to $35 was a reasonable price range for the Opec's oil.
Sheikh Ahmed said: "It looks almost certain the market will continue above $30. For that [reason], I think we have to study carefully changing the basket price to about $30-$35."
Analysts said that Opec's price band had lost much of its credibility among consumers because prices since November had fallen within its range on only a handful of days.
Michael Rothman at Merrill Lynch said: "Opec as a group has done a less than credible job during 2004 administering the targeted price band by having emitted mixed signals and actions when prices moved to levels that were viewed as too high."
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