135th Meeting of the OPEC Conference

No 5/2005
Isfahan, Iran
16 Mar 2005

The 135th Meeting of the Conference of the Organization of the Petroleum Exporting Countries (OPEC) convened in Isfahan, I.R. Iran, on 16th March 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 welcomed the Minister of Petroleum of Angola, the Minister of Oil & Gas of the Sultanate of Oman, the Minister of Petroleum & Mineral Resources of the Syrian Arab Republic and high-level representatives from Egypt and Mexico, whose presence at the Meeting is seen as renewed confirmation of these countries’ solidarity with the objective of the Organization to stabilize the oil market.

The Conference reviewed the Secretary General's report, the report of the Economic Commission Board, the report of the Ministerial Monitoring Sub-Committee (MMSC) - whose Members the Conference again thanked for their untiring efforts on OPEC’s behalf - and various administrative matters.

Having reviewed the oil market situation and its immediate prospects, the Conference observed that, with the market having remained well supplied, OECD commercial oil stocks at the end of the fourth quarter 2004 were at comfortable levels, exceeding their five-year average level. Furthermore, the Conference noted that, although all indicators continue to show that the market is fundamentally well-supplied, world crude oil prices have resumed their increase. This is due to a number of factors, mainly the late cold winter spell in the Northern Hemisphere, the expectation of unabated strength in demand over the medium term, as well as price pressure and volatility coming from increased activity of non-commercials in the futures markets, such as hedge funds and, more recently, pension and index funds. The situation is being further exacerbated by the influence of geopolitical tensions and downstream bottlenecks.

The Conference noted, in particular and with concern, that the shortage of effective refining capacity, especially conversion capacity, is expected to persist, continuing to create dislocations between crude and products markets as well as contributing to higher oil prices, and renewed its call on all parties, including non-OPEC producers and consumers, to undertake joint efforts to address the challenges facing the oil industry, including bottlenecks affecting the downstream oil industry, as well as called on consuming governments to align their environmental with their energy policies.

In view of the expectation of another year of strong global oil demand, coupled with constraints in the downstream sector and the overall expectation of a slow-down in the pace of non-OPEC supply growth, requiring an increase in OPEC production in the second half, in particular the fourth quarter 2005, and in order to satisfy this market demand, ensure comfortable levels of stocks in the second half as well as halt and reverse the price escalation, the Conference decided to increase the production ceiling to 27.5 mb/d, effective immediately. The Conference further authorized its President, after consultations with fellow Heads of Delegation, to announce an additional 500,000 b/d increase in the ceiling, until its next Meeting, should oil prices remain at current levels or continue to further rise. In taking this decision, the Conference once again confirmed the Organization’s commitment to maintaining stability and ensuring that global markets remain adequately supplied at all times. To that end, Member Countries have already accelerated existing capacity expansion plans and are making timely investments to expand capacity in the longer term. Moreover, this decision is a reaffirmation of OPEC’s commitment to ensuring adequate supplies consistent with robust economic growth, in particular in the emerging economies of the developing world.

The Conference also agreed to continue to closely monitor market developments and to take appropriate and prompt action, as and when the need arises. With this in mind, the Conference decided to convene an Extraordinary Meeting at Headquarters, Vienna, on Tuesday, 7th June 2005.

The Conference approved the recommendation from the Board of Governors and the Economic Commission Board to change the composition of the OPEC Reference Basket of Crudes (ORB), to-date made up of seven crudes, to a composition of eleven crude streams representing the main export crudes of all Member Countries, weighted according to production and exports to the main markets. The Secretariat is to calculate the new proposed Basket on a trial, daily basis, in parallel with the current ORB, reporting back on the results to the next Meeting of the Conference, in light of which the Conference shall announce the effective date of implementation.

The Conference passed Resolutions that will be published on 17th April 2005, after ratification by Member Countries.

The Conference decided that its next Ordinary Meeting will be convened in Vienna, Austria, on 19th September 2005.

The Conference expressed its appreciation to HE Seyed Mohammad Khatami, President of the Islamic Republic of Iran, the Government and people of the Islamic Republic of Iran, as well as the authorities of the City of Isfahan for having hosted the Meeting and for the warm hospitality extended to the Conference and all Delegates. In addition, the Conference recorded its special thanks to HE Bijan Namdar Zangeneh, Minister of Petroleum of the I.R. Iran, and his Staff for the excellent arrangements for the Meeting.