Opec told to hike oil output

Reduced production by Opec oil exporters risks causing another damaging oil price spike this year, an influential energy consultancy warned on Monday.

The Centre for Global Energy Studies (CGES) urged the 12-member Opec cartel to raise production to help lower prices and avoid another shock on the oil market during the northern hemisphere summer.
“If Opec really wants the stable market it claims to seek, now is the time to raise output,” the CGES monthly report for April said. “Opec should no longer be concerned about prices falling, but about avoiding another spike.”

It also said that Opec had underestimated oil supply from non-Opec countries this year, potentially causing a shortage of supply. The price of oil hit a record near US$80 per barrel last year because of geopolitical uncertainty caused by the war between Israel and the Lebanese Shi’ite militia Hezbollah.

Opec sees the world needing production of 30.3 million barrels per day in order to leave stocks unchanged, while the CGES believes it would need 30.7 million barrels per day.

This difference of 400,000 barrels per day could create, or avoid, a repeat of last year’s damaging price spike, it stated. Oil is currently trading at around US$67 dollars per barrel in London and US$64 dollars in New York. CGES added that the high level of oil prices had already begun reducing demand. High prices encourage investments to increase energy efficiency and alternative sources of power. “Global oil demand growth has slowed in response to high oil prices and global economic growth might well weaken,” said the report.

Brunei Times