ALGIERS: Even if Opec pumps at full capacity it may not be able to meet strong fourth quarter demand without sufficient inventories being built up beforehand, Algeria’s oil minister has said.
Chakib Khelil said he was not concerned by the current situation in the oil market, but rather about the fourth quarter, which traditionally sees a sharp rise in demand due to cold weather.
“Let’s assume we go to a maximum (in output) and assuming we don’t have any (significant) stocks, we are not going to meet demand in the fourth quarter,” Khelil said on the sidelines of an energy ceremony in the capital Algiers.
“What you need to do is raise stocks in the third quarter to accumulate enough of them in the third quarter that you can deplete stocks and maintain a high level of production for the fourth quarter. That’s what I’ve been saying we need to do,” he said.
US light crude settled up 13 cents to $50.96 on Friday after breaking over $52 earlier in the session. London Brent settled down 36¢ to $50.77 a barrel.
Crude oil prices have risen on concern Opec and other producers may not be able to meet strong demand in the second half of the year, particularly given that Opec has struggled to meet demand during the off-peak season.
Opec pumps about 40% of the world’s oil.
“People are still worried that despite that we will be producing at full (capacity) we are not going to meet (demand), that’s what people are worried about and they are also worried about what will come next year,” Khelil said.
“They have to be concerned because we are not going to have any surplus capacity available so anything could happen during the first quarter and that’s showing in the market,” he said.
Khelil said a strong global economy, with oil demand driven by the US and China, meant prices would remain high.
“The only way we are going to have a slack in prices is if the economy really slows down,” he said. He said prices around $50 a barrel did not seem to be a concern.
“That’s not a problem. Nobody is raising the issue with prices (at around $50), (US Federal Reserve Chairman Alan) Greenspan, the Europeans or (US President George W) Bush,” he said.
Stockpiles in the US - the world’s largest energy consumer - hit their highest level in nearly six years last week thanks to soaring import levels, according to the US Energy Information Administration.
Opec production has risen steadily since the start of the year, and US government data released on Wednesday showed commercial crude stocks rising 2.6mn barrels last week to 327mn barrels, their highest since July 1999.
Algeria, a member of the oil exporting group, is producing near full capacity of around 1.4mn barrels per day.
Algeria’s oil minister repeated that a future concern was a lack of enough refineries to process the crude.
“What’s the use of having a lot of oil if you can’t refine it or cannot stock enough products to be used in the winter time,” Khelil asked.
“Nobody can build a refinery in two years and people have just barely started taking decisions this year. Saudi Arabia, and others, including Libya and ourselves have taken decisions so you are going to see a lot of new refinery capacity but not within the next two to three years,” he said. - Reuters