Drop in demand has led to oil surplus

Press, 9 July 1983, Page 11

Drop in demand has led to oil surplus

NZPA London The world oil market has a surplus of eight million barrels a day, or 400 million tonnes a year, and appears to have entered a period of a continuing decline in prices and plentiful supplies, the head of the International Energy Agency said in London yesterday. The agency’s executive director, Dr Ulf Lantzke, emphasised that the surplus had resulted “from a drop in demand, not a magical increase in supply.” The agency groups leading industrialised countries, and Dr Lantzke was speaking at a seminar organised by the “Financial Times” paper.

“We have a cushion of some eight million barrels per day surplus capacity in the world today, in addition to some three million barrels which I consider ‘normal’ surplus capacity needed to balance the market seasonally,” he said. Demand for oil produced

by the Organisation of Petroleum Exporting Countries would exceed the organisation’s production ceiling of 17.5 million barrels a day. He said that the excess demand would be slight during the third quarter of the year, and might be two million barrels a day during the fourth quarter. “Of course the possibility remains that the decline in oil demand will not be reversed in the second half of 1983, or that stocks may not be rebuilt according to historic patterns,” Dr Lantzke said. The Kuwaiti Oil Minister, Sheikh Ali Khalifa al-Sabah, told the seminar on Thursday that he thought it unlikely that O.P.E.C. would change its production limit of 17.5 million barrels a day until the end of 1983, before the fourth quarter. The limit was set in March, and O.P.E.C. will hold an ordinary six-monthly meeting in Helsinki on July 18 and 19.

Dr Lantzke said yesterday that despite the market surplus the balance of investment made in other energy sources had been “broadly positive.” But he urged officials in Western nations to speed up the use of coal which he said could meet 30 per cent of world energy use by the end of the century, and of nuclear power which he said was one of the best and most reliable alternatives to imported energy. Two main problems about coal remained to be resolved, he said. One was the conflict between its use and the environment, and the other was its price, which must remain advantageous in relation to oil. Dr Lantzke said that during the 1990 s it seemed likely that nuclear power’s full technical and economic potential would be markedly under-used, adding that nuclear power received little political support in the United States.