OPEC stands pat; Iraq elects government

Sam Fletcher
Senior Writer

Two events occurred Jan. 30 that should have long-term effects on oil markets. On that date, to no one's real surprise, ministers of the Organization of Petroleum Exporting Countries agreed to maintain production at 27 million b/d for the 10 members other than Iraq, which that same day conducted its first nationwide election since the 2003 war.

Officials said 57% of 14 million eligible voters went to the polls in Iraq to elect a new government. They said it could take 10 days for the election results to be known. At stake are 275 seats in Iraq's national assembly. Iraq's next challenge will be to come up with a new constitution that will satisfy hostile political factions.

Meanwhile, OPEC members voted to suspend temporarily the $22-28/bbl target price band for crude that they instituted in 2000, as prices have remained above $28/bbl since December 2003. OPEC ministers also agreed to monitor crude markets prior to their next meeting Mar. 16 in Iran.

"Although OPEC continues to pay lip service to its $22-28/bbl target price band, it has long abandoned any real attempt to keep prices within that range," said the London-based Centre for Global Energy Studies in a Jan. 24 report. "Whatever their public stance, every member of the organization is seeking to maintain the price of the OPEC basket of crudes well above $28/bbl, and none is unhappy to see it at its present level of more than $40/bbl."

Moreover, CGES predicted, "Saudi Arabia's revenue needs in 2005 will lead it to seek an OPEC basket price of at least $35/bbl this year at an average level of oil production of around 9 million b/d."

Higher prices expected
Analysts in the Houston office of Raymond James & Associates Inc. expect an even higher average OPEC price.

"Given the weaker dollar, higher shipping costs, and minimal evidence of price-related demand destruction, it is easy to see why Saudi Arabia and most other OPEC members would insist on $40 WTI as the floor going forward. If anything, the only opposition within OPEC to the Saudi stance is that it is not bullish enough!" they reported Jan. 24.

Still, with OPEC's latest meeting and Iraq's first election now somewhat safely past, some US financial analysts are expecting more participants in world markets.
Raymond James analysts earlier observed that if the Iraqi election establishes "an effective government," one or more major international oil companies might decide to invest in that country (OGJ Online, Jan. 17, 2005).

Paul Horsnell of Barclays Capital Inc., London, reported Jan. 26 that longer-term crude prices hit all-time record highs the previous week. Futures prices for benchmark US light, sweet crudes for December 2010 delivery have moved above $40/bbl for the first time, he said.

"The front end of the WTI curve was at its highest exactly 3 months ago, and since then the curve has flattened noticeably," without derailing the upward trend of longer-term prices, said Horsnell. "For us, that move up in the commodity market's view of sustainable longer-term oil price averages is the single most important market feature that necessitates change within the oil industry and its associated capital markets."

He said, "The back end of the curve has risen by $12 over the past year, by $17 over the past 2 years, and by $19 over the past 3 years. The now-abandoned $18-21[/bbl] consensus for longer-term prices looks like rather a quaint relic, and we would now expect the market to become increasingly comfortable with placing the back end of the curve above $40[/bbl]."

IEA revises OPEC call
The Paris-based International Energy Agency reported in January that Iraqi production increased by 160,000 b/d in December to an average 1.95 million b/d. Iraq's total oil exports gained 210,000 b/d to 1.55 million b/d.

But Iraqi consumption fell by about 55,000 b/d as pipelines feeding the northern Baiji and Daura refineries were repeatedly disrupted. Because of pipeline sabotage, crude had to be trucked to the Daura facility in December. A Dec. 23 attack shut down pipelines feeding Kirkuk crude to the Baiji refinery until the second week of January.

IEA raised its earlier prediction of the expected call on OPEC by 100,000 b/d to 28.1 million b/d in 2004 and by 300,000 b/d to 28 million b/d in 2005.

In December, OPEC ministers voted to reduce overproduction by 1 million b/d effective Jan. 1. Just prior to Jan. 30, crude exports from OPEC were reported down by nearly 800,000 b/d from their peak in late December, and scheduled loadings indicated a further decline of 30,000 b/d through Feb. 12.

(Online Jan. 31, 2005; author's e-mail: samf@ogjonline.com)

Related Articles

Encana to focus spending on four core shale assets in 2015

12/16/2014 Encana Corp., Calgary, reported plans to spend $2.7-2.9 billion on its capital budget with roughly 80% of this total directed towards four of what ...

Development plan outlined for Gullfaks Rimfaks Valley

12/16/2014 A consortium led by Statoil ASA has submitted a development plan for the Rutil discovery in the North Sea’s Gullfaks Rimfaks Valley that will exten...

Cenovus trims budget, slows oil sands work

12/16/2014 Cenovus Energy Inc., Calgary, is trimming its capital spending in response to declining crude oil prices and will slow development of some of its t...

Pengrowth starts commercial steam operations at Lindbergh thermal project

12/16/2014 Pengrowth Energy Corp., Calgary, reported the startup of commercial steam operations at Phase 1 of its Lindbergh thermal project in the Cold Lake a...

Husky, CNOOC start gas production at Liuhua 34-2 field

12/15/2014 Husky Energy Inc. and China National Offshore Oil Corp. Ltd. reported the start of natural gas production at the Liuhua 34-2 gas field in the South...

Security takes center stage

12/15/2014

Thwarting terrorists, repelling pirates, and routing organized crime: sounds like themes of familiar, big-budget Hollywood movies.

Study finds small subset of wells accounts for most methane emissions

12/15/2014 A small subset of natural gas wells are responsible for most methane emissions from US natural gas production, said a study from the University of ...

US Forest Service takes no stance on fracturing in national forest

12/12/2014

The US Forest Service has dropped a proposal that would have banned hydraulic fracturing in the George Washington National Forest.

Frac ban exemption made in Broomfield

12/12/2014 A Colorado District Court judge has ruled that a hydraulic fracturing ban in Broomfield, Colo., does not apply to an operator that entered into an ...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected