Kuwait says Opec should keep output unchanged

KUWAIT - The Opec oil producers cartel should keep output levels unchanged when it meets this week in Venezuela to help stabilise high oil prices, the head of Kuwait's delegation to the meeting said today.

"Kuwait thinks Opec should not change the output ceiling and keep it as it is now," Siham Razzouqi, Kuwait's Opec governor, told Reuters in a telephone interview before departing. Her views were seconded by the country's energy minister later.

The Organisation of Petroleum Exporting Countries meets at the end of the week in Caracas as petroleum prices hover near historic highs above $75 per barrel. Oil prices are high amid worries over supply disruptions and global geopolitics due to tension between the United States and key producer Iran.

Opec members Iran, Indonesia and the UAE have already said they do not want or expect the exporters club to alter its production levels. Venezuelan Energy Minister Rafael Ramirez said today Opec should cut output if it wants to address an oversupply of crude oil in global markets.

But Opec President Edmund Daukoru told Reuters the cartel will probably keep formal supply quotas unchanged while it continues to pump as much crude as it can to ease market concerns over shortages.

Razzouqi is representing Kuwait at Opec in the absence of Energy Minister Sheikh Ahmad al-Fahd al-Sabah, who was quoted by state news agency KUNA as saying before departing for Russia that Opec should maintain its production unchanged.

"We will support keeping production at its current ceiling," Sheikh Ahmad said.

"Oil prices are still high and whatever the increase in demand in the third quarter, the market will be full of crude oil to cover this demand," he said, adding he hoped this "will help stabilise prices."

Asked about his expectations for prices, Sheikh Ahmad said: "Prices are not linked to supply or demand like in the past but to other issues such as geopolitical problems." Razzouqi told Reuters the oil market, though well supplied, faces several factors to prompt Opec not to cut production.

"The market situation looks good, there is no shortage in the market and the OECD stockpiles are comfortable at about 54 days (of forward cover)," she said, referring to the 30-nation Organisation for Economic Cooperation and Development.

"But because of the general situation, the prices and the worries of entering into the (US) driving season and fears of the hurricane season, that means there are several reasons behind the need to maintain the status quo," she said.

Razzouqi was referring to predictions of another fierce hurricane season in the United States this year following 2005's Hurricanes Katrina and Rita, which wreaked havoc on crude oil production capacity in the US Gulf Coast.

"The potential risk from supply interruptions and the level of current prices with the presence of strong demand -- even though it started to weaken a little -- all these factors combined dictate keeping output levels unchanged," she added.

She cited worries of supply "disruptions like what happened in Nigeria (due to rebel attacks) and the situation in Iran." Kuwait's production, she said, was 2.5 million to 2.6 million barrels per day, close to its maximum capacity.

Razzouqi said Opec's spare capacity was some 2 million bpd. She reiterated recent remarks from Kuwait's energy minister that global markets had a surplus of at least 1.5 million bpd.

"The market does not suffer any supply shortages; on the contrary there is a surplus," she said. "According to current estimates, there's about 1.5 million (bpd) oversupply, but of course we'll review the new data in Caracas."

Razzouqi said she believed the majority of Opec nations lean towards keeping production levels as is, despite Venezuela's call that fundamentals show a supply reduction is needed.

"Fundamentals are not just supply and demand," she said.

"We look at many indicators such as the price level and trend, expectations for the third quarter and year end, and the stockpile or cover, meaning how many days can this inventory cover," Razzouqi noted.

"Prices are still strong and there is no justification for lowering output." Asked if Kuwait sees a fair price for the Opec basket, she said: "When market conditions are fully back to normal Opec will be more able to specify suitable price levels. Under current conditions, Opec suspended or basically abandoned the basket."

Opec's reference crude basket was last valued at US$65.10 ($104.16) a barrel on Friday. In the United States, US light crude last traded at US$71.37 per barrel on Friday while London Brent crude closed at US$70.59 ahead of a long holiday weekend.

Razzouqi said there was still no evidence of high petroleum prices denting global economic growth but added there were some signs that oil demand growth has been curtailed a little.

"It's been noted that in some countries that raised domestic prices, such as Asian nations which gave up (fuel) subsidies, there is some weakening demand, or growth in demand is not the same," Razzouqi told Reuters.

"The new data shows demand growth is weaker than before. It's about 1.25 million to 1.5 million (bpd). So it is noticed that prices have started to impact (demand) growth rates."

- REUTERS