Speaking at the World Economic Forum meeting on Saturday, Shaikh Ahmed Fahd al-Sabah said Opec will change its culture and reformulate its price band of $22-28 a barrel.

The price band has been suspended since January after sharp rises in oil prices to well over $50 made it a virtual irrelevance.

"The culture of the market has changed and in the second quarter (where demand normally drops) there is a growth in demand," Shaikh Ahmed, who is also Kuwait's Energy Minister, told a panel discussion on oil.

"We are waiting until the end of the year to review the experience of the last two years to reformulate our culture and price band."

Growing oil demand

Shaikh Ahmed said global demand for oil grew 2.6 million barrels per day to 82.5 million bpd in 2004, and by the fourth quarter this year demand is expected to increase to 85 million bpd.

An increase in global oil demand
has fuelled a rise in oil prices



"Last year demand grew 4-5% while this year it is growing 3-4%. We've normally had such an increase in four years [in the past], while we had it in one year," the Opec chief said.

The market is no longer only governed by supply and demand, as several other factors have started to play a role.

"The market has changed ... Factors like the environment, geopolitics, [higher] economic growth and stockpiles are now playing a major role," Shaikh Ahmed said.

The Opec president said members of the cartel are committed to ensure enough supplies in the market.

"Our main target is to ensure continuity of supplies. There is already two million bpd of oversupply in the market," he said.

Production increase

Opec members are willing to invest to increase output capacity, but they are concerned about the security of growing demand and other sources of energy.

Spiralling oil prices have hurt
consumers in America

"We are willing to invest to increase our capacity. We will increase our production capacity by one million bpd by the end of the year.

"But we have two main worries; security of demand and other alternatives of energy," said Shaikh Ahmed, adding that Opec members do not want to invest and then lose out.

Opec officials have said that current Opec's capacity is approaching 32.7 million bpd and it will reach 33 million bpd by the end of 2005.

Shaikh Ahmed said Opec is looking to achieve a fair and stable price for oil.

"We are looking at a fair price for both consumers and producers," he said, adding that Opec's strategy committee is studying the most ideal price band.

Oil price rise

"...we have two main worries; security of demand and other alternatives of energy"

Shaikh Ahmed,
Opec president

World oil prices rose on Friday amid higher US crude stocks, a continuing strike at French energy giant Total and speculation of an Opec production cut.

New York's main contract, light sweet crude for delivery in June, added eight cents to $47.00 per barrel in early deals on Friday, after earlier hitting $46.70 - the lowest point since 14 February.

In London on Friday, the price of Brent North Sea crude oil for delivery in July gained 14 cents to $48.02 per barrel.

Shaikh Ahmed called on international oil companies to enter into joint ventures with Opec countries to have "comprehensive investments" which involve upstream and downstream projects, including refineries.