OPEC sticks to the script

21 June 2002

In the run-up to OPEC's 26 June meeting, members have reaffirmed their commitment to retaining current production quotas, indicating that output will remain unchanged throughout the year. The expected rollover reflects a continued weak demand picture, with US stocks rising throughout late mid June. Benchmark Brent crude on 19 June was valued at $24.98 a barrel.

'The upcoming meeting should not increase production. There should be unanimity on extending the current agreement on the production ceiling until the end of the year,' said Qatar's Energy & Industry Minister Abdulla bin Hamad al-Attiya on 15 June. '$25 a barrel is acceptable to both producers and consumers.' Outgoing OPEC secretary-general Ali Rodriguez confirmed the position on 18 June. 'There will be no more cuts, for the moment,' he said. 'There is still some fluctuation in prices, but thanks to our well-timed decisions, prices have remained within OPEC's parameters, between $22-28 a barrel.'

The low output rates are starting to hurt some producers. Venezuela, where the political turmoil in April was sparked by controversy over energy policy, has lifted actual production by 180,000 barrels a day (b/d) over its quota, according to the US' Sempra Energy Trading, prompting accusations of a policy change towards increased market share. 'The overproduction probably stems from [Venezuelan President Hugo] Chavez's increased revenue requirements, necessary for him to maintain popular support, and therefore his grip on power,' says the Sempra June report. 'But OPEC officials are putting a brave face on matters, claiming that other countries will tolerate the overproduction because the alternative, Chavez loses the presidency and Venezuela reverts to its former, production-expansion policy, would be worse.'

While actual supply levels remain unpredictable, demand continues to be poor, with latest US stocks figures proving painful reading for OPEC ministers. The Energy Information Administration on 19 June said that in the week ending 14 June, US gasoline stocks rose by 800,000 b/d and distillates by 300,000 b/d. However, crude stocks fell by 500,000 b/d.

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