| OPEC allowed to produce as much oil as it wanted The Organization of Petroleum Exporting Countries (OPEC) has finally recognized world oil prices as too high. For this, oil prices in America had to approach almost $40 per barrel. Now, according to the head of the cartel, Indonesian Purnomo Yusgiantoro, the actual volume of oil production by the cartel will exceed the established quotas until the quotes drop to at least $28 per barrel. Cartel experts also revised their forecasts for the level of oil consumption in the second quarter of this year. Now, oil ministers at their next meeting on March 31 will decide to abandon the reduction in oil production quotas from April 1, as previously planned, and will leave the official oil production volume at the current level of 24.5 million barrels per day.
“For the sake of stabilizing prices, exceeding quotas is permissible,” ITAR-TASS quotes Mr. Yusgiantoro as saying. At the same time, an anonymous high-ranking representative of the organization claims that the cartel can further increase oil production, despite the fact that OPEC countries’ production is already at least 1.5 million barrels per day higher than the official quota.
Recently, oil prices have been at prohibitively high levels. In early March, on the London Stock Exchange they approached $34 per barrel several times; on the New York stock exchange, the price of a barrel of oil repeatedly reached $37. Previously, quotes rose to the same level before the start of hostilities in Iraq. In addition, now the volume of supplies from this country has already reached the pre-war level and amounts to 2.5 million barrels per day. Yesterday in London, according to futures contracts for April, a barrel of oil cost $32.66 versus $32.11 the day before.
However, more recently, OPEC predicted a drop in seasonal oil demand in the second quarter by 2-2.5 million barrels per day and a decline in prices. Therefore, at its last session on February 10, the cartel decided to reduce production quotas by 1 million barrels, to 23.5 million barrels per day, from April 1. In February, OPEC countries had to deal with issues of “discipline” - to bring their actual production into line with quotas providing for production at the level of 24.5 million barrels per day, while in reality in December and January the total volume of oil production by the organization’s countries was at least 26 million barrels per day. True, the cartel failed to maintain “discipline”: according to the oil agency Argus, OPEC (with the exception of Iraq) produced about 26.14 million barrels per day in February, which is 140 thousand barrels more than in January. As follows from the words of Mr. Yusgiantoro, the cartel will continue to exceed official production volumes. In addition, yesterday analysts from the International Energy Agency (IEA) revised upward the forecast for world oil demand for 2004. Compared to data published in February, according to experts, demand will increase by 220 thousand barrels, to 1.65 million barrels per day. The main consumers are expected to be China and a number of other developing countries - due to them, demand will increase by 1 million barrels of oil per day.
As reported by Bloomberg, citing a statement by the Minister of Oil Industry of the United Arab Emirates, Obeid bin Sheif al-Nasseri, oil prices will exceed the level of $40 per barrel “if OPEC fulfills its promise to reduce oil production.” A few days earlier, the Minister of Petroleum and Mineral Resources of Saudi Arabia, Ali al-Naimi, said that he considers the current level of oil prices to be too high and unprofitable for both producers and consumers. “The demand for oil turned out to be higher than analysts, including OPEC experts, predicted,” says Mikhail Perfilov, development director of the Moscow office of the Argus oil agency. -- Previously, oil ministers always stated that the supply of raw materials exceeds demand, and high prices are the result of speculative play in American markets. However, the consistently high level of prices and the very low level of oil and petroleum products reserves in the United States finally forced OPEC to admit that cutting production at the moment is inappropriate.” Denis REBROV |
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