The OPEC oil cartel will raise supply to near 25-year highs next month even though it will postpone a rise in formal production quotas until a June meeting, the group's president said today.
Kuwait's Sheikh Ahmad al-Fahd al-Sabah said that the group will raise production by around 500,000 barrels per day (bpd) to prepare for an expected demand surge later this year.
This would take OPEC production back above 30 million bpd for the first time in six months, near 25-year highs hit last year as producers struggled to meet rising world consumption.
"Because of the behaviour of the market for the third quarter, we think in May there will be a real production for another 500,000," Sheikh Ahmad told reporters.
"In order to guarantee the flow of crude oils to the markets there will be an automatic increase from the members without a resolution (from OPEC)," he added.
Middle East Gulf producers are eager to raise output to encourage stockbuilding in the coming months, creating a buffer for strong demand later this year.
Top world exporter Saudi Arabia last week told crude customers in Asia and in the integrated oil majors that it would raise May supplies by a total of around 500,000 bpd, industry sources have said.
The extra supply has helped bring US crude prices down more than $8, or 14 per cent, from record highs over the last two weeks. Today, they were down 69 cents at $49.80 a barrel.
"I think prices have become almost at a fair price. If there will be an increase it will be in May because the market will need this kind of increase because the demand will grow in the third quarter," Sheikh Ahmad said.
OPEC oil ministers agreed last month to raise production quotas by 500,000 bpd and left themselves the option of a second 500,000 bpd increase if prices kept on rising above $55.
"Prices now are going down. It is not giving us any reason to increase our 500,000 now," Sheikh Ahmad said. "For that we can't say this until we have our meeting in June."