Opec to seek assurances on oil demand

FE Team | Published: November 13, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

Javier Blas and Roula Khalaf , FT Syndication Service
RIYADH: Opec will this week seek assurances from some of the world's biggest oil consumers that they will maintain their demand as the members of the oil cartel come under intense pressure to boost investment in production capacity.
The call, to be made at a summit of the Organisation of the Petroleum Exporting Countries in Riyadh at the weekend, could boost long-term prices as investors worry the oil cartel will not invest enough to meet consumption in the face of growing demand from the likes of China and India.
The summit - only the third in Opec's 47-year history - comes as oil prices race towards a record $100 a barrel and with Opec crude oil revenues set to rise to $658bn this year, an increase of almost 9.0 per cent from 2006, according to the latest US government figures. The summit is expected to issue a declaration that will highlight the "relationship between security of supply and security of demand", according to Opec sources.
Consumer countries, in particular the US and in Europe, are investing in alternative sources of energy, such as biofuels and nuclear power, and energy-saving measures to reduce their dependency on crude oil and combat global warming.
Some Opec countries are worried such moves could jeopardise future demand just as they embark on expansion plans. "The declaration will be a statement on oil relations as seen by Opec," said one cartel source, referring to a draft of the statement.
But signs that countries in the cartel are considering taking measures to boost production weighed on oil prices on Monday. Crude, which hit a record price of $98.62 last week, fell 1.5 per cent to $94.70 but analysts warned that trading could become volatile later in the session as traders turn their attention to the expiry of December contracts on Tuesday.
The International Energy Agency, the western countries' energy watchdog, warned last week about the risk of a "supply crunch" before 2015. However, Saudi Arabia will use the occasion to stress it has raised its output capacity, with an extra 500,000 barrels a day arriving next month as part of an $80bn (â‚¬54.5bn) investment to reach 12.5m b/d by the end of 2009.
Ali Naimi, Saudi oil minister, has said his country had identified projects for further increases to 15m b/d in the medium term.
The IEA last week forecast Opec would need to almost double production in the next 25 years. It said the oil cartel would need to supply about 60.6m b/d in 2030, up from current output of almost 36m b/d.
Opec plans to invest about $130bn until 2012 to raise its oil output, and between 2013 and 2020 it is expected to invest a further $500bn in capacity.