134th (Extraordinary) Meeting of the OPEC Conference

No 2/2005
Vienna, Austria
30 Jan 2005

The 134th (Extraordinary) Meeting of the Conference of the Organization of the Petroleum Exporting Countries (OPEC) convened in Vienna, Austria, on 30 January 2005, under the Chairmanship of its President, HE Sheikh Ahmad Fahad Al-Ahmad Al-Sabah, Minister of Energy of the State of Kuwait and Head of its Delegation, and its Alternate President, HE Dr. Edmund Daukoru, Nigerian Presidential Adviser on Petroleum Energy and Head of its Delegation.

The Conference recorded its deepest sympathy with and condolences to the Governments and peoples of Member Country, Indonesia, and other nations struck by the devastating Tsunami in late December 2004, with such an enormous and tragic loss of life and property.

The Conference considered the report of the Ministerial Monitoring Sub-Committee, and thanked the Members for their untiring efforts on behalf of the Organization, as well as presentations on various subjects.

Having reviewed the oil market situation, in particular the overall demand/supply expectations for the first half of 2005, as well as the outlook for the oil market in the medium term, the Conference observed that the level of global oil supply, particularly OPEC output, exceeded demand, allowing commercial oil stocks to build to above their five-year average. Consequently, the OPEC Reference Basket price had moderated over the fourth quarter 2004, averaging US$36/b in December 2004, with many of OPEC’s heavy crudes standing lower.

The Conference further noted that, whilst prices have since strengthened, as a result of seasonal market characteristics, including cold winter weather, prices have been in contango for some time, especially in the case of heavy crudes. This situation is, moreover, accompanied by a certain degree of market volatility, reflecting concern over possible supply disruptions and the expectation of continued strong demand. Since current supply/demand forecasts indicate that the market will remain in balance through the first quarter 2005, the Conference decided to maintain currently agreed production levels. In this connection, the Conference reiterated its call on Member Countries to ensure strict compliance with agreed production levels.

Aware of the expected seasonal drop in demand in the second quarter, and given the stock-build, which might be accentuated in light of the current market situation, the Conference further decided to continue monitoring market developments and that its President should make consultations ahead of the next Ordinary Meeting of the Conference, scheduled to convene in Isfahan, I.R. Iran, on 16 March 2005, to ensure that a timely cut could be made, as appropriate.

After reviewing the evolution of the OPEC Reference Price since its inception in 2000, the Conference noted that prices have remained outside the Band for over a year due to market changes that have rendered the Band unrealistic and has, therefore, decided to temporarily suspend the current Price Band, pending completion of further studies on the subject.

Notwithstanding this temporary suspension, the Conference stressed that the Organization remains firm in its commitment to maintaining a stable market with prices at reasonable levels conducive to expansion of production capacity and supply growth to meet rising demand, as well as to ensuring that there is enough oil to fuel global economic growth in the 21st Century, in particular in the developing countries.

The Conference expressed its appreciation to the Government of the Republic of Austria and the authorities of the City of Vienna for their warm hospitality and the excellent arrangements made for the Meeting.