Opening address to the 130th Meeting of the OPEC Conference

No 4/2004
Vienna, Austria
31 Mar 2004

by HE Dr Purnomo Yusgiantoro, President of the Conference and Minister of Energy and Mineral Resources for Indonesia

Excellencies, ladies and gentlemen,

Welcome to the OPEC Secretariat in Vienna , for the 130th Meeting of the OPEC Conference.

I should like to extend a special welcome to HE Dr Fathi Hamed Ben Shatwan, Secretary of the People’s Committee for Energy of the Socialist People’s Libyan Arab Jamahiriya, who is attending the OPEC Conference for the first time as Head of his country’s Delegation. We should also like to thank his predecessor, HE Dr Abdulhafid Mahmoud Zlitni, for the contributions he has made to Meetings of our Conference and to wish him every success and happiness in the future.

As we stand on the threshold of the second quarter of 2004, we find ourselves facing much uncertainty in the international oil market. There has been persistent upward pressure on oil prices in recent months, even though the market has been well-supplied with crude. We shall be examining the reasons for this during our Meeting. We shall look at recent supply and demand patterns, inventory movements, geopolitical tensions and other leading indicators — and the way these have inter-reacted in a market that is heavily influenced by speculation, to the detriment of fundamentals. We are also concerned about the low value of the dollar and the effect this is having upon our petroleum revenues, since these play a crucial role in financing the development of our domestic economies. It is important that we gain a thorough appreciation of all the issues at hand, because these issues are likely to remain with us during the second quarter and further on in the year. As we all know, the period April-to-June is traditionally one in which demand falls, as the Northern Hemisphere emerges from the winter, with its heavy consumption of heating oil, and before we enter the summer driving season.

In a sensitive marketing environment like oil, where psychology plays a prominent role, it is easy for a minor impulse to be fuelled by speculation and develop into something much larger, and sometimes even a major crisis, before anyone has a chance to take the appropriate remedial measures. We have seen this happen often in the past, with serious repercussions for not just producers and their domestic economies, but also for consumers and the world at large.

We exercise a policy of constant vigilance, therefore, as we seek to recognise the early signs of any problem arising, so that we can pre-empt it and maintain a high level of stability within the market. This explains our decision of February 10, when we agreed to reduce our production ceiling by one million barrels a day, with effect from April 1 — that is, tomorrow. We did this because we expected a significant fall in world oil demand in the second quarter of this year and we wanted to send a signal to the market that we were prepared for this and would act in such a manner that would prevent severe downward pressure on the price and a protracted period of volatility, as occurred five or six years ago.

It is better to get this signal out early, when it can serve to maximum effect, rather than adopting hasty, reactive measures when the damaging scenario is already unfolding.

This brings us on to today’s Meeting. We now need to review our existing production agreement, to see whether it fully accommodates the changes in the market outlook that have arisen since February 10. As usual, we will rely heavily upon the research that has been carried out by the Secretariat in the intervening period, and the reports that have been prepared for us to assist us with our decision-making. If we conclude that our agreement needs revision, then we shall act accordingly.

Whatever we do, whatever measures we decide to take, will be in the best interests of the international oil market generally — producers and consumers, OPEC and non-OPEC. We will, at the same time, ensure that our near-term actions blend in well with longer-term considerations, for we are as committed to the welfare of the oil sector in five or ten years’ time as we are in the next three-to-six months.

The success of our market-stabilisation measures depends, to a large extent, on the support they receive from other oil producers. We are all in the oil business together and, as a result, we share the responsibility for sustained order and stability in the market, with secure supply, reasonable prices and fair returns for investors. While noting the very real progress that has been made in recent years in the field of cooperation, we nevertheless, once again, call upon all producers to acknowledge this responsibility and actively support our market-stabilisation measures, since we all stand to benefit from them.

In this regard, we are pleased to welcome as observers at this Conference officials from the following leading non-OPEC oil-producing countries: Angola, Mexico, Oman, Russia, Sudan and Syria. Their presence is indicative of the importance they attach to constructive dialogue and cooperation with our Organization and its Member Countries.

Thank you for your attention.