VIENNA -- OPEC ministers on Thursday said a capacity crunch on crude supplies and refinery bottlenecks meant its latest deal on higher output limits was unlikely to cut oil prices, according to a Reuters report.
Speaking after a Wednesday meeting of the Organization of Petroleum Exporting Countries, ministers said they were already making every effort on crude supply to topple prices from $55 a barrel. Patients need medicine but this is not the right medicine, said Libyan Energy Minister Fathi Bin Shatwan. The problem is not a problem of supply, it's [image-nocss] a problem of refining.
U.S. crude rose 17 cents to $55.73 a barrel, extending this week's gains to more than $2 a barrel.
Venezuela's Oil Minister Rafael Ramirez said Wednesday's agreement, lifting output quotas by 2%, could prove counterproductive because it highlighted OPEC's lack of spare capacity. The problem with the price is nothing to do with supply, he said. I think what the market is saying is that the more we raise the supply ceiling the less flexibility we have in production capacity.
OPEC raised formal output limits by 500,000 barrels a day to 28 million bpd but is not expected to increase real supply because actual output for 10 members with quotas at 28 million. Iraq, exempt from a quota, pumps about another 1.8 million.
Supply is already ahead of demand, said Shatwan. OPEC should not be held responsible. OPEC's responsibility is to provide the market with crude oil, it has already done that.
OPEC also authorized cartel President Sheikh Ahmad al-Sabah to consult on another 500,000-bpd increase should prices stay high.
With all OPEC members except Saudi Arabia at full capacity, it will be up to Riyadh to pump more. Saudi Minister Ali al-Naimi said he was willing to lift output, but could only do so if he could find buyers. We are ready to supply more crude, Naimi told Reuters. But get us the customers. There is no shortage of oil. It's there but, what is driving the price is the inability to make the oil into products.
Spare Saudi volumes are of heavy, high-sulfur crude that needs advanced refinery technology to meet Western environmental regulations for petroleum products. All that capacity is already employed.
Algerian Oil Minister Chakib Khelil said he thought prices were likely to stay high. I think so, we still have a refinery capacity problem, he said.