HOUSTON, Dec. 10 -- Energy prices continued to climb Thursday in anticipation that members of the Organization of the Petroleum Exporting Countries would at least curb overproduction at their meeting Friday in Cairo.
Indeed, OPEC ministers voted Friday to reduce overproduction by 1 million b/d effective Jan. 1, while retaining their present total production quota of 27 million b/d for the 10 members except Iraq. The 10 members affected by the quota are estimated to be overproducing that maximum level by 1.1-1.7 million b/d. With Iraq included, current OPEC production is estimated to total 29.5-30 million b/d.
The 10 OPEC members subject to quota restrictions fear that demand for their crude could fall to 26 million b/d by April. At its last meeting in mid-September, OPEC raised its production quota by 1 million b/d to 27 million b/d, although members were actually producing more than that at the time. Despite continued overproduction, the price for OPEC's basket of seven benchmark crudes subsequently hit a record high of $46.61/bbl on Oct. 21, before starting to tumble in November. As of Wednesday, OPEC's basket price was down to $33.78/bbl, "or some 27.5% below the record level registered in October," said Purnomo Yusgiantoro, OPEC's conference president, in his opening address Friday.
By reducing overproduction, OPEC expects to turn around the recent fall in crude prices. OPEC's basket price increased Thursday by 51¢ to $34.29/bbl.
"We are also concerned about the recent heavy falls in the value of the US dollar, in which international crude oil sales are priced and which will have a direct impact on the value of our petroleum revenue," said Purnomo, who is also energy minister of Indonesia. However, there was no indication in OPEC's press release at the end of Friday's meeting that the group took any action to change its current target price band of $22-28/bbl, although its crude has been selling above that level for more than a year.
The group said it would convene another extraordinary meeting Jan. 30 in Vienna to review market developments at that time. OPEC's meeting Friday was attended by representatives from Angola, Egypt, Sudan, Syria, Oman, and Russia.
Meanwhile, the Norwegian Petroleum Directorate said Thursday that oil production in Norway, the third largest exporter of crude, was down by 157,000 b/d during November as a result of planned maintenance, technical problems, and a labor strike.
The January contract for benchmark US light, sweet crudes increased by 59¢ to $42.53/bbl Thursday on the New York Mercantile Exchange, while the February contract was up by 66¢ to $42.97/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., gained 59¢ to $42.54/bbl. Heating oil for January delivery jumped by 4.02¢ to $1.30/gal Thursday on NYMEX with forecasts for colder weather in the Northeast US that is expected to mark the end of the mild winter thus far. Gasoline for the same month was up by 2.38¢ to $1.11/gal. The January natural gas contract gained 20.3¢ to $6.89/MMbtu "on a firmer cash [spot gas] market, higher crude prices, and a bullish weekly . . . inventory report," said analysts Friday at Enerfax Daily.
The Energy Information Administration reported Thursday an unexpectedly large withdrawal of 88 bcf of natural gas from US underground natural gas storage during for the week ended Dec. 3. That compared with withdrawals of 5 bcf the previous week and 111 bcf a year ago. US natural gas storage now exceeds 3.2 tcf, up by 227 bcf from last year and 343 bcf above the 5-year average.
In London, the January contract for North Sea Brent increased by 98¢ to $39.67/bbl Thursday.
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