MercoPress. South Atlantic News Agency

More stable oil market forecasted for 2007

Increased oil and gas production in the Caspian Sea, Africa and North America will help OPEC meet global demand in 2007, according to the International Energy Agency.

As new wells come into production non OPEC members are forecasted to pump sufficient oil next year to meet the growth of world demand, contrary to what happened in 2005.

"OPEC will face a challenge in 2007 since the high oil prices helped create a scenario which encourages more production and less consumption", said Adam Sieminski chief energy economist for the Deutsche Bank.

The increase in production could help to further down prices, currently in the range of 60 US dollars per barrel, three times the 2002 level, and which many consumer countries consider too steep.

However there are still problems which include forced production cuts in rigs to hurricanes in the Gulf of Mexico that have delayed the supply increase in recent years.

Non OPEC member countries including the world's second exporter Russia contribute almost 60% of global supply but only hold one fourth of proven oil and gas reserves.

When production is delayed, OPEC comes under pressure, which has established quotas among its ten members to meet world demand in the range of 85 million bpd.

According to IEA, which is an advisory group to 26 industrialized countries, non OPEC production could increase by 1.7 million bpd next year. However more conservative estimates believe 850.000 bpd is a more "realistic figure".

"Theoretically we should have an improvement in the supply of oil next year, with in excess of 300 to 400.000 bpd that should help stabilize world markets", said Lawrence Eagles head of the IEA Industry and Markets Department.

"Adjusted to demand and supply risks, markets should be more finely tuned", he added.

OPEC on the other hand is anticipating a drop in oil and gas demand next year, anywhere in the range of 700.000 bpd, particularly if non OPEC countries production increases and world demand expectations remain as forecasted.

Some OPEC members are insistently talking of further cut in production, for the second time in two years to help sustain the current level of prices. The issue is top of the agenda for the coming meeting in Nigeria.

OPEC production since last November first was cut by 1.2 million bpd, following an agreement reached in October to help contain the decrease in oil prices which have fallen an estimated 25% since the record 78 US dollars per barrel of last mid July.