OPEC gets serious

23 November 2001


As US crude reserves rise and non-OPEC producers continue to debate a production cut, OPEC has settled at least one question, with recent figures showing improved quota discipline. In November, the organisation produced 23.91 million barrels a day (b/d), excluding Iraq, some 710,000 b/d more than its production ceiling. The figure is a slight improvement on its performance in October, when it produced 23.97 million b/d and a strong improvement on its performance in September, when it produced 24.58 million b/d, according to the figures compiled by Reuters.

All OPEC members, except Indonesia, in November had still to meet their quotas. The worst culprit was Nigeria, with overproduction of 310,000 b/d, while Saudi Arabia produced 200,000 b/d over its quota. Libya and Iran both produced some 100,000 b/d above their output ceilings and Kuwait exceeded its quota by 40,000 b/d, Reuters said.

Although the tighter discipline will go some way towards strengthening the organisation's position, OPEC continued in mid-December to press non-OPEC producers to commit to a 500,000-b/d output cut. Russia in early December indicated it was ready to cut about 150,000 b/d in the first quarter, echoing an earlier pledge from Mexico to cut 100,000 b/d. Norway has indicated it will cut between 100,000-200,000 b/d and Oman is also prepared to cut some production. Only a 500,000-b/d cut will trigger an OPEC cut of 1.5 million b/d, needed to shore up a creaking oil market.

Under discussion is not only the size, but also the duration, of the proffered output cut. OPEC wants a commitment to a cut lasting throughout the first half of next year, but it has signalled it will extend non-OPEC producers some flexibility over the issue. Russia has also been conciliatory, offering a six-month cut. Independent analysis shows the country would increase its oil exports by about 100,000 b/d in the first quarter of 2002 without the imposition of government-supported cuts.

US stockpiles rose in the week ending 11 December, according to figures released by the American Petroleum Institute. Crude reserves grew by 272,000 b/d and distillate stocks increased by 3.5 million b/d, confounding trader expectations of a 2 million-b/d drawdown. Analysts cite the unseasonably warm weather, coupled with the continuing problems in global industry, as the major causes for the stocks build, indicating an ongoing collapse in world oil demand.

The price of Brent crude on 18 December was $18.40 a barrel, a fall of $1.63 from the previous week. OPEC's basket of crudes was valued at $16.62 a barrel on 18 December, a decline of $1.58 on the previous week.

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