OPEC is settling back into its favoured rhythm after its mid-March meeting: it is monitoring a basket price comfortably within its preferred price band of $22-28 a barrel, and is unlikely to change production quotas even at the scheduled 26 June meeting. Although the organisation is entering the traditional spring season of lower oil demand in the northern hemisphere, the market is tightening as both OPEC and non-OPEC producers continue to constrain their production.
Acting Kuwaiti oil minister, Information Minister Sheikh Ahmad Fahad al-Sabah, said in late March that he was satisfied with the oil price in the lower end of the band. 'We are happy with the prices and we hope they remain stable,' he said. Oil ministers at the recent OPEC meeting discounted stories that the oil price band had been suspended when the price fell in October.
The fears over the preservation of OPEC market share were boosted in late March, when the Paris-based International Energy Agency (IEA) said that Russian oil production had in February overtaken that of Saudi Arabia for the first time in a decade. The IEA said that Russia had produced 7.3 million barrels a day (b/d) of oil in the month, while the kingdom's output was only 7.2 million b/d, constrained by a fall in its OPEC quota of 1.1 million b/d since early last year.
Uncertainty over the shape of US military action against Iraq and the question marks hanging over the future of Hugo Chavez's left-wing administration in Venezuela leave the market prospects opaque in the second half of the year. US military action would precipitate price spikes in the short term, while a new administration in Caracas would be likely to increase oil production, putting downward pressure on the oil price.
Employees at Petroleos de Venezuela continued protesting against what they see as government interference in the company's affairs in late March, after the allegedly forced retirement of two leading executives. The employees have in the past ruled out the use of industrial action to seek redress for their grievances.
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