HOUSTON, Sept. 24 -- In a surprise move, members of the Organization of Petroleum Exporting Countries voted Wednesday morning to trim their production quota by 900,000 b/d to 24.5 million b/d, effective Nov. 1.
Although no formal announcement had yet been made, Kuwait's oil minister was reported to have confirmed that decision at the OPEC meeting in Vienna.
Energy futures prices were mixed Tuesday ahead of the OPEC meeting and the release Wednesday of industry and government reports that were expected to show builds in US inventories of crude and petroleum products.
The general consensus among analysts prior to Wednesday's meeting was that OPEC would roll over its previous production agreement through the fourth quarter of this year. Several OPEC ministers had signaled a general agreement to maintain production quotas going into the meeting.
"Crude oil prices have weakened since our last meeting 2 months ago, but they remain with the range of our price band of $22-28/bbl for OPEC's reference basket [of seven benchmark crudes]," said Abdullah bin Hamad al-Attiyah, Qatar's energy minister and OPEC conference president, at the opening of Wednesday's session in Vienna. He noted that world oil prices were near the top of that band in July-August.
"Prices have been supported in the summer by the uncertainty about developments in Iraq, disruptions in some producing countries, low stocks, and high natural gas prices in the US. This has been in spite of the fact that there has been no shortage in the physical market for crude oil, as enquiries among our customers have confirmed," Al-Attiyah said.
"The recent weakening of the price has coincided with the end of the summer driving season," he noted. "Nevertheless, the situation in the market remains relatively stable."
OPEC ministers "must take into consideration the state of the world economy," Al-Attiyah said. "Low [economic] growth rates and increasing unemployment will not help demand. Forecasted increases in non-OPEC output will provide an added element of pressure on the call on OPEC oil," he warned.
"This is why we are constantly reminding fellow producers outside our organization of the need for consultations and coordination, in the interests of price stability at reasonable levels. OPEC cannot act alone. We have already seen our market share suffer in recent years as we have sought to manage our production levels to the benefit of all producers," Al-Attiyah said.
Representatives from Angola, Egypt, Mexico, Oman, Russia, and Syria are sitting in as observers at the OPEC meeting.
A delegation led by Ibrahim Bahr al-Ulum, Iraq's new oil minister, is attending the OPEC meeting for the first time since the invasion of that country by US-led coalition forces to oust Saddam Hussein from power. Al-Ulum said Wednesday that Iraq is committed to its support of OPEC and its policies. But Venezuela is refusing to recognize the Iraqi delegation, claiming that they do not represent a duly constituted government.
US oil stocks climb
Meanwhile, the US Energy Information Administration reported early Wednesday that commercial US crude inventories increased by 1.5 million bbl to 280.8 million bbl during the week ended Sept. 19. However, EIA officials said, those stocks are nearly 18.5 million bbl below the 5-year average for that period.
US gasoline stocks increased by 1.5 million bbl to 196.8 million bbl last week, down by 9 million bbl from the 5-year average, officials said. US distillate fuel inventories dipped by 100,000 bbl to 131.2 million bbl during the same period, with a decrease in diesel fuel "nearly offset" by an increase in heating oil, EIA officials said. Distillate fuel inventories are 1.1 million bbl less than the 5-year average, they said.
Crude inputs into US refineries averaged 15.4 million b/d last week, down by 390,000 b/d from the previous week. "Decreases in crude oil refinery inputs occurred in every region of the country, which may signal the beginning of the fall maintenance season," EIA reported.
US imports of crude averaged 10.3 million b/d last week, down by 460,000 b/d from the previous week. Iraqi crude apparently was imported into the US "for the third week in a row," said EIA officials.
In Vienna, Al-Ulum reported Iraq is now exporting 900,000 b/d of oil and expects to raise those exports to 1.5 million b/d by the end of this year and 1.8 million b/d by the end of March. Iraq currently is producing 1.8 million b/d, but is forced to reinject 200,000-250,000 b/d, he said. Attacks northern on oil pipelines have hinder Iraq's ability to transport oil to refineries or export terminals.
The November contract for benchmark US light, sweet crudes dipped by 6¢ to $27.13/bbl Tuesday on the New York Mercantile Exchange, while the December position retreated by 11¢ to $26.89/bbl. The cash spot market price for benchmark US oil, with delivery at Cushing, Okla., lost 5¢ to $26.93/bbl Tuesday.
However, unleaded gasoline for October delivery gained 0.95¢ to 80.95¢/gal Tuesday on NYMEX. Heating oil for the same month was up by 0.64¢ to 70.83¢/gal.
The October natural gas contract inched up by 1.7¢ to $4.51/Mcf Tuesday on NYMEX. That increase was supported by a firm cash market and buys by traders to cover open sales positions ahead of the expiration Friday of the October contract, analysts said Wednesday at Enerfax Daily.
In London, the November contract for North Sea Brent oil dipped by 1¢ to $25.52/bbl Tuesday on the International Petroleum Exchange. However, the October natural gas contract jumped by 4.4¢ to the equivalent of $3.26/Mcf on IPE.
The average price for OPEC's oil basket increased by 32¢ to $25.14/bbl Tuesday.
Contact Sam Fletcher at firstname.lastname@example.org.