OPEC is in talks about boosting oil supplies, Kuwait's oil minister said on Tuesday, but many in the group remained skeptical, saying world supply is comfortable despite the loss of Libyan crude.
Kuwait's comment that the Organization of the Petroleum Exporting Countries is considering an official increase in output sent oil prices lower, as did an assurance from top world exporter Saudi Arabia that it could help meet any shortages.
We are in consultations about a potential output increase but have not yet decided, Kuwait Oil Minister Sheikh Ahmad al-Abdullah Al-Sabah told reporters on Tuesday.
The fighting in Libya has shut down about two-thirds of the oil output in Africa's third-largest producer. The OPEC member normally pumps 1.6 million barrels per day (bpd), or about 2 percent of world output.
While OPEC has not changed its formal policy for more than two years, it has been boosting actual supply for months. Saudi Arabia said on Tuesday the world had sufficient oil and it held enough in reserve.
The kingdom has 3.5 million barrels a day of spare capacity which could help compensate for any shortages, Saudi oil minister Ali al-Naimi said in remarks carried by Saudi state news agency SPA.
Brent crude oil fell by more than $2 after the Kuwaiti comments and by 1633 GMT was down $1.58 at $113.46 a barrel. On February 24 Brent hit $119.79, the highest since 2008 when it reached an all-time high of $147.50.
A different message emerged from Iran, OPEC's leading oil price hawk and holder of the rotating OPEC presidency in 2011. Its OPEC governor, Mohammad Ali Khatibi, downplayed speculation of more OPEC oil.
There is no shortage in the market, he told Reuters. There is no need for further OPEC supply. But the consumers are worried, this is psychological.
OPEC is not scheduled to meet to review its policy until June, and its Secretary General Abdullah al-Badri is sounding out the mood in the group on whether an earlier meeting was warranted, the Kuwaiti minister said.
I have talked to al-Badri, and he's calling everybody and making a consensus on whether we need a meeting, he said.
Algerian oil minister Youcef Yousfi, attending an energy conference in Houston, told Reuters OPEC was discussing a possible production increase but that Algeria saw no shortage. Leading executives at the event agreed.
There is plenty of capacity in the world today ... to meet the shortfall from Libya, said John Hess, CEO of Hess Corp. That will stabilize prices from getting out of hand.
OPEC would not need to meet to adjust supplies because members often change output informally in response to demand and prices. Saudi Arabia has already raised its output and some other members are expected to do so.
Senior sources in Saudi Arabia told Reuters last week that the kingdom has already increased production and was pumping around 9 million bpd -- about 1 million bpd more than its OPEC target.
The kingdom has also developed a special mix of its lighter, low-sulfur crude -- most similar to the coveted oil that Libya produces -- and its standard heavy, more sour grades to ease fears of a shortage of high-quality oil.
In line with the kingdom's efforts to stabilize (the) oil market, it took a number of steps to meet all the additional demand from its customers and develop a special crude mix which is close to supplies lost, Naimi said on SPA.
Riyadh, which favors a relatively moderate oil price range of $70 to $80 a barrel, sometimes steps in unilaterally to meet shortages or when it feels prices have risen to levels that may threaten economic growth or oil demand.
Saudi Arabia is the only country able to pump large amounts of extra oil at short notice.
Investment bank Goldman Sachs raised its oil price forecast on Tuesday, saying it believed Saudi Arabia had already used up more of its surplus capacity than is widely thought, hindering OPEC's ability to respond to any further demands.
We believe that Saudi production could be 0.5-1 million bpd higher than the official numbers suggest, which would imply that OPEC spare capacity has already dropped below 2 million bpd, the bank said in a report.
Revised production estimates from the U.S. government's Energy Information Administration (EIA) added to signs that the Saudi increase may have come weeks before the Libyan outage.
The EIA said the kingdom pumped 9 million barrels a day in January and February, much more than other estimates.
Smaller supply increases are on their way from other OPEC members. Export schedules show Nigeria, like Libya a supplier of high-quality crude, is going to pump more in April after a period of field maintenance ends.
Kuwait, which analysts say is also capable of adding some extra barrels, has not raised its output, the oil minister said.
OPEC has not changed its formal output policy for over two years since agreeing to cut production by a record 4.2 million bpd in December 2008 to combat plunging oil prices amid a global economic slowdown.
In practice, the group has been steadily increasing supplies since mid-2009 because of a recovery in prices and demand. As of February, it was meeting only about half of the promised output curbs.
OPEC has on a previous occasion in 2001 adjusted output, after telephone talks between ministers and without a meeting.
(Additional reporting by Regan Doherty, Edward McAllister, Joshua Schneyer and Alex Lawler in London, editing by William Hardy, Jane Baird and Jim Marshall)