SAUDIS LIKELY TO PREVAIL FOR STEADY OPEC CEILING
While pressure mounts from outside and inside the Organization of Petroleum Exporting Countries for oil production cuts, Saudi Arabia is bent on maintaining output at today's quota.
Saudi Arabia is among key OPEC members that are keen to maintain market share. As a result, there is little room for OPEC to maneuver on production quotas. So a decision to continue the present ceiling is likely at the Mar. 24 ministerial meeting, says London's Centre for Global Energy Studies (CGES).
OPEC said it has received no briefings from member states' energy ministers. Hence, there is no consensus on any course of action in readiness for the ministerial meeting in Geneva.
CGES expects further increases in non-OPEC oil production amounting to 1 million b/d outside the former Soviet Union (FSU) during 1994. With world oil demand expected to grow by 800,000 b/d during the year, there will be mounting pressure on OPEC to control production or risk a further oil price slide.
"To engineer an output cut without Saudi cooperation is hardly credible," CGES said. "And it is difficult to see how the kingdom can be persuaded to change its position.
"Prices would need to rise substantially in the short term to compensate Saudi Arabia for its lost output volume, and a decision to go below its publicly stated floor of 8 million b/d would set a worrying precedent."
In addition, CGES said, cutting production to obtain higher oil prices also would benefit other producers and encourage further expansion of non-OPEC capacity.
PRICE DECLINE
An OPEC spokesman said the average price for OPEC basket crude oil was $13.13/bbl during the week starting Feb. 14. The previous week's average OPEC basket price was $13.93/bbl.
North Sea Brent blend for March delivery fell during the week. At close of trading Feb. 11, Brent crude was priced at $13.12/bbl, down 64cts for the week. This included a 5 year low of $12.92 Feb. 16 in New York trading.
Norway's Den norske stats oljeselskap AS said the decline in Brent prices reflected several factors, including a bi, increase in oil exports from the FSU.
FSU exports were said to average 1.4 million b/d in January, while sales in mid to late February were about 2 million b/d.
Nigeria was said by the OPEC spokesman definitely to want an OPEC production cut, along with Libya and Algeria.
Venezuela under new Energy Minister Erwin Arrieta is "Slightly out of sync" with OPEC politics. At the March OPEC meeting, rather than pursue cutbacks, Arrieta is expected to propose formation of a "permanent world forum." This would be an informal group of producer and consumer nations formed to discuss oil supply/demand problems.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.