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OPEC cutback accord beginning to register

June 21, 1999

OPEC crude oil production [88,634 bytes] Organization of Petroleum Exporting Countries members trimmed their total output in May, helping justify a recent rebound in crude oil prices. Under a production cutback deal that took effect Apr. 1, OPEC's April production average was down significantly but still fell short of a pledge agreed to in March (OGJ, May 24, 1999, p. 44). However, the latest OPEC production estimates from Middle East Economic Survey (MEES) show that OPEC's compliance

OPEC crude oil production [88,634 bytes]

Organization of Petroleum Exporting Countries members trimmed their total output in May, helping justify a recent rebound in crude oil prices.

Under a production cutback deal that took effect Apr. 1, OPEC's April production average was down significantly but still fell short of a pledge agreed to in March (OGJ, May 24, 1999, p. 44).

However, the latest OPEC production estimates from Middle East Economic Survey (MEES) show that OPEC's compliance with the pledge rose to 90% during May from 87% in April (table).

After the April figures, the price for Brent crude oil futures fell below the $15/bbl mark, suggesting that traders had been overly optimistic. However, reports of dwindling oil stock levels and an explosion that crippled a major U.S. refined products pipeline helped buoy prices (see Industry Briefs, p. 34).

At the close of London trading on June 14, dated Brent crude stood at $16.16/bbl, while Brent crude for July delivery stood at $16.57/bbl, having hovered safely above $16/bbl for a week.

As news of the OPEC figures spread, crude oil prices rose. Dated Brent closed at $16.48/bbl, while July Brent closed at $16.89/bbl in London trading on June 15.

OPEC compliance

MEES noted that Iran, Venezuela, Saudi Arabia, Qatar, and Kuwait all reduced average daily output in May, but that Indonesia and Nigeria both registered increases.

"In Nigeria," said MEES, "shortly after his assumption of power on May 29, the new president, Olusegun Obasanjo, ordered the state oil company Nigerian National Petroleum Corp. to comply fully with the OPEC production cutback agreement."