'Demand is expected to be weak in the next few months, putting further pressure on prices, particularly in the second quarter,' said OPEC Secretary-General Ali Rodriguez in Auckland, New Zealand, on 24 February. 'But if Russia continues to maintain its position, we could by the second quarter reach our objective.' Russia in late December agreed to cut output by 150,000 barrels a day (b/d) as part of a 2 million-b/d cut orchestrated by OPEC and non-OPEC producers. However, its cuts were made not from existing production levels but from first-quarter production estimates. As a result, the country's actual production cut from fourth-quarter levels was only about 19,000 b/d.

OPEC's own quota compliance remains uncertain. The Energy Intelligence Group in mid February estimated OPEC's January compliance at just 77 per cent, with production standing 1.2 million b/d over its 21.7 million-b/d quota, which was effective from 1 January. Some overproduction can be attributed to the lateness of OPEC's decision to go ahead with the cuts at the end of December. At the mid-March meeting, OPEC is expected to keep output unchanged despite the poor price forecast. The organisation has cut production levels by 5 million b/d from early 2001.

The latest US demand data gave mixed messages. The American Petroleum Institute reported on 26 February a rise in US stocks of crude oil of 2.52 million barrels, bringing total reserves to 39 million barrels more than in February 2001. However, stocks of refined products like gasoline and distillates both fell. The price of Brent crude on 27 February was $20.70 a barrel, while the price of OPEC's basket of crudes on 26 February was $19.45 a barrel.