OPEC 'cuts' oil production to stave off high oil prices
By an OGJ correspondent
VIENNA, Apr. 24 -- Ministers of the Organization of the Petroleum Exporting Countries carefully hedged their political, economic, and diplomatic bets at the conclusion of a meeting held in Vienna Thursday, agreeing to maintain an output level of 27.4 million b/d until June 1, when they will introduce a "cut" of 2 million b/d to 25.4 million b/d—a rate some 3.7% higher than their current quota.
Although announced as a cut in production, after the June 1 deadline, the organization's official quota will actually rise by 900,000 b/d to 25.4 million b/d from the current agreed level of 24.5 million b/d.
Ministers framed their decision in the context of market stability, following the collapse of production from Iraq after the US-led war, while the June 1 time limit is meant to stave off criticism that they are taking advantage of their fellow OPEC member.
"The decision gives them the opportunity to say they are serving the market, while blunting accusations of opportunism over Iraq's misfortune," one analyst told OGJ Online. "The deadline gives them the fig leaf of willingness to surrender the extra production, assuming Iraq production does increase."
Iraq not present
A founding member of OPEC, Iraq did not have a representative at Thursday's meeting. A spokesman at the Iraqi Embassy in Vienna told OGJ Online that his office had received "no instructions" from anyone concerning attendance at the meeting.
Sources close to OPEC told OGJ Online that Ministers felt a certain "relief" that "self-appointed" representatives of the Iraqi Oil Ministry had not shown up at the meeting. "That would have been highly embarrassing all around," the source said.
Last week, Muhammed Mohsen al-Zubaidi, the self-appointed "mayor" of Baghdad announced that he had picked a delegation to attend the OPEC conference, but US authorities now in control of the country played down the reports.
Wednesday, the US military moved to strip al-Zubaidi of his "authority" and warned other Iraqi factions not to take advantage of the confusion and the political void in the country by trying to grab power.
"The US announcement also came as a relief to OPEC members, enabling them to avoid any possible embarrassment in having to confront such a delegation," the source told OGJ Online.
Despite the absence of any representation from Iraq, however, OPEC Pres. Abdullah bin Hamad Al Attiyah denied the organization was taking over Iraq's production quota. He said that Iraq's current production stands at "zero" but that OPEC would "accommodate" Iraq at their next meeting, scheduled for June 11 in Doha, Qatar.
Looking farther to the future, with the presumed resumption of higher levels of production from war-torn Iraq, Al Attiyah said: "Iraq is a member of OPEC and will remain a member, hopefully." When their production rises, he said, "then we'll discuss it."
More cuts expected
Underlining the organization's willingness to keep the door open for eventual increased output from Iraq—even as early as June 1—Al Attiyah stressed that "we decided to cut and may decide to cut more at Doha."
Clearly sensitive to potential criticism, OPEC ministers collectively issued a statement calling on the OPEC secretariat to monitor "closely" developments in Iraq in the run-up to the Doha meeting.
"In the interim, the conference also requested the secretariat to continue closely monitoring the market, in particular the timing and level of the expected recovery in Iraqi oil production and its impact on overall supply-demand balance in the market, in general, and OPEC production levels, in particular," the statement said.
A certain degree of confusion entered into the OPEC announcement, as the organization's calculations factored in Iraqi production, which was overseen by the United Nations' oil-for-aid program and normally excluded from OPEC statistics.
Including Iraqi production, estimated at around 1.9 million b/d, OPEC said the organization's production level stood at 27.4 million b/d for the first 3 months of this year, and output would remain at that level until the June 1 deadline.
The 900,000 b/d quota increase after June 1 will be divided among the OPEC 10 on a pro rata basis, giving each member a 3.7% increase, officials said.
New quotas
OPECNA News Agency reported the new individual member countries' quotas, effective June 1, as: Algeria, 811,000 b/d; Indonesia, 1.317 million b/d; Iran, 3.729 million b/d; Kuwait, 2.038 million b/d; Libya, 1.36 million b/d; Nigeria, 2.092 million b/d; Qatar, 658,000 b/d; Saudi Arabia, 8.256 million b/d; UAE, 2.217 million b/d; and Venezuela, 2.923 million b/d.