|New Oil Production Might Send OPEC Prices Lower, World Bank Report Says |
Sept. 4 (Bloomberg) -- The Organization of Petroleum Exporting Countries will face pressure to reduce crude oil prices because of rising output from Iraq and other producing countries, the World Bank said in an annual report.
The average price of the Brent, Dubai and West Texas Intermediate benchmark crude oil grades is projected to drop to $18 a barrel in 2006 and 2007 from the estimated 2003 average of $26.50 a barrel for this year, the bank said.
Prices will decline as new oil production from the Caspian Sea, Russia, West Africa, U.S. Gulf of Mexico and other sources rivals production from OPEC, which pumps about a third of the world's oil, the World Bank said.
The 10 OPEC members with quotas, excluding Iraq, will have ``difficulty managing oil prices'' in 2004, which is when Iraqi oil exports are expected to exceed levels before the U.S.-led invasion in March, according to the bank's report.
As OPEC makes room for Iraqi production under its quota roster, the group will also dispute over requests from members, including Nigeria and Algeria, seeking higher quotas, the report said.
``The expansion of OPEC capacity will occur when non-OPEC producers are expected to capture virtually all the growth in world oil demand,'' the bank said. ``Consequently, oil prices are expected to fall to the lower end of OPEC's price band in 2004.''
OPEC has maintained prices within its target range of $22- $28 a barrel for its benchmark basket of oils in the past few years because of greater member compliance to quotas. Supply disruptions from Venezuela as a result of a nationwide strike in December and a protracted winter last year also helped to bolster prices.
The OPEC benchmark price was last below the bottom-end of the target range on March 8, 2002, when it was at $21.87 a barrel. The group's basket price was at $26.86 a barrel yesterday.
If OPEC members adhere to output targets and are able to maintain prices at or above $25 a barrel, ``it would further impact oil demand growth and stimulate even greater supplies from competing sources,'' according to the report. ``OPEC would only prolong a decline in oil prices that is expected by mid-decade,'' the bank said.
The World Bank projects oil prices will reach $19.50 a barrel in 2010 and $22 in 2015.
Iraqi efforts to boost production and exports since the U.S. invasion have been hampered by insufficient electricity, sabotage and looting.
The Persian Gulf country's oil output last month rose by 430,000 barrels a day to an average of 1.28 million barrels a day. That's the most since the U.S.-led invasion, according to a Bloomberg survey. Iraqi exports in August were limited to 645,000 barrels a day, according to the survey.
The country pumped 2.48 million barrels a day in February, or about 3 percent of world supply. Its exports averaged 1.73 million barrels a day last February.
Last Updated: September 4, 2003 15:30 EDT