The Organization of Petroleum Exporting Countries was destined not to cut production to defend the price of crude at its ministerial meeting Nov. 27 in Vienna, which had not occurred when this was written.
For the same reason, the group was destined not to raise production, either.
OPEC doesn’t produce oil. Its members do.
“OPEC production” is really the total of production rates of member countries, which act according to their own interests. Those interests vary considerably.
Members desperate for revenue and producing at capacity rates, for example, tend to seek lower group production but to want other members to make the cuts.
Members with capacity to spare and large cash reserves have greater flexibility and, therefore, influence.
Reminders about these finer points of OPEC behavior are in order because this meeting is much more important than its boring predecessors of the past few years.
Before the meeting speculation was active about whether OPEC would cut production. Much follow-up coverage was sure to report that OPEC had or had not cut output.
What OPEC in fact does in its meetings is act—or choose not to act—on production targets. Lately, that target has been a collective 30 million b/d. Years ago the group tried also to assign individual production quotas, but those efforts quickly became contentious and never worked.
An adjustment in Vienna to the existing, longstanding group target would represent an important signal to the market.
Always more important, though, is actual production in relation to the target.
Because those numbers usually differ, distinguishing between production targets and actual output represents more than nitpicking. In October, according to the International Energy Agency, OPEC members collectively exceeded the target by 600,000 b/d.
Even an expression in Vienna of determination to pull output back to the target rate thus would be significant, especially if accompanied by commitments from specific members to do the cutting.
As always, though, the more important number will be actual production in months ahead.
(From the subscription area of www.ogj.com, posted Nov. 26, 2014; author’s e-mail: [email protected])