The Conference expressed its warmest congratulations to HE Dr. Ibrahim Bahr Alolom on his recent appointment as Minister of Oil of Iraq and paid tribute to the contribution made to the Organization by his predecessor in office, HE Dr. Thamir Ghadhban.
The Conference considered the report of the Ministerial Monitoring Sub-Committee, and thanked the Members for their untiring efforts on OPEC’s behalf, as well as presentations on various subjects.
Having reviewed the oil market situation and its immediate prospects, the Conference observed that the market continues to be well supplied, as a result of OPEC’s decision in March 2005 to increase its production ceiling to 27.5 mb/d, and that, consequently, commercial crude and product stocks have continued to build to comfortable levels, around average in terms of days of forward cover. However, the Conference noted that world crude oil prices remain high and volatile as a result of concern about a lack of effective global oil refining capacity, in particular possible shortages of middle distillates in key consuming regions. Refineries, whilst already running at high utilization rates, are facing difficulties in coping with strong distillate demand-growth. The situation is being further exacerbated by geopolitical developments and increased speculation in the oil futures markets.
In the light of the expectation of strong global oil demand during the remainder of the year, in particular in the fourth quarter 2005, and with the resumption of price increases, the Conference decided to raise the current OPEC production ceiling by 500,000 b/d, to 28.0 mb/d, with effect from 1st July 2005. The Conference further authorized its President, after consultations with 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 rise further.
In taking this decision, the Conference re-affirmed the Organization’s commitment to market stability, a commitment clearly expressed in Member Countries’ repeated raising of output levels and the acceleration of their production capacity expansion plans aimed at meeting growth in global demand for crude and at maintaining adequate spare capacity.
In this vein, the Conference called on all parties concerned to join efforts to maintain market stability, with reasonable prices consistent with robust economic growth, in particular in the emerging economies of the developing world, as well as steady revenue streams, for producing countries and the industry, conducive to the expansion of upstream and downstream capacity to meet rising international demand for oil and products. The Conference emphasized its particular concern about the shortage of effective refining capacity required to meet future strong demand growth, as a consequence of under-investment in this sector, especially in conversion capacity, as well as excessive regulation. The Conference, therefore, repeated its call on industry and consumer governments to urgently address this challenge which, if left unresolved, will exacerbate oil price volatility.
The Conference agreed to continue to closely monitor market developments and to take appropriate and prompt action, as and when the need arises.
Further to the decision taken by the Conference in March 2005 to change the composition of the OPEC Reference Basket of Crudes (ORB) 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, and after reviewing the Secretariat’s report on its trial calculation, the Conference decided that this new Reference Basket should be introduced with immediate effect, replacing the current ORB.
The Conference welcomed the launch and positive outcome of the OPEC/EU Energy Dialogue, held on 9th June 2005 in Brussels, and recorded its commitment to continuation of this and other regional and international dialogues. In this respect, the Organization looks forward to hosting the next OPEC/EU Dialogue Meeting in Vienna and expressed its confidence that this Dialogue will serve to further enhance and strengthen cooperative relations between producers and consumers.
The Conference confirmed that its next Ordinary Meeting is to take place in Vienna, Austria, commencing 19th September 2005, in a month when the Organization will commemorate the Fortieth Anniversary of the OPEC Headquarters’ move to Vienna with a series of events starting from 20th September 2005.
The Conference expressed its renewed appreciation to the Government of the Republic of Austria and the authorities of the City of Vienna for their continued warm hospitality and the excellent arrangements made for the Meeting.