PRICES UP, BUT MARKET SKEPTICAL ON OPEC CUTS

Roger Vielvoye
International Editor

Crude oil prices began recovering last week following the Organization of Petroleum Exporting Countries agreement to cut output by 1.445 million b/d.

OPEC vowed to implement the cuts at the wellhead rather than in sales in a bid to have an early effect on the market, but crude traders were skeptical about the desired result.

North Sea Brent blend for June delivery, which fell to $16/bbl immediately after the meeting from $17.45/bbl, recovered to $17.10/bbl May 9.

West Texas intermediate futures for June delivery closed May 9 at $18.99/bbl, up about 300 on the week.

OPEC CUTS DETAILED

OPEC's lower levels of production are to remain in effect through July 1990. Here is how OPEC plans to parcel the 1.445 million b/d cut from April production of 23.5 million b/d:

Saudi Arabia, overproducing by about 430,000 b/d, will return to its 5.38 million b/d quota.
Kuwait will cut production by 400,000 b/d to its 1.5 million b/d quota.
Nigeria will return to its 1.611 million b/d quota, ceasing overproduction of 140,000 b/d.
United Arab Emirates, producing 2.1 million b/d in April against its 1.095 million b/d quota, will make a 200,000 b/d cut.
Other countries scheduled to make cuts on the agreed April production figure are Libya 77,000 b/d to 1.233 million b/d, Gabon 73,000 b/d to 270,000 b/d, Venezuela 15,000 b/d to 1.945 million b/d, and Ecuador 7,000 b/d to 273,000 b/d.

BELOW QUOTA PRODUCERS

Algeria, Indonesia, Qatar, Iran, and Iraq were producing a combined 103,000 b/d below quota during April.

All five will remain just below quota levels, although for Algeria and Indonesia it may be difficult to achieve even these levels.

The agreed levels for the below-quota producers are Iran and Iraq each 3.12 million b/d (quota 3.14 million b/d each), Algeria 760,000 b/d (780,000 b/d), Indonesia 1.23 million b/d (1.27 million b/d), and Qatar 367,000 b/d (370,000 b/d).

OPEC scheduled the next ministerial meeting for July 25. It was set for late May, then postponed until late June because of the emergency meeting in Geneva.

IEA DATA DIFFERS

International Energy Agency also estimated OPEC's April production at 23.5 million b/d but with notable differences in individual national levels.

IEA estimates Saudi production in April was only 5.7 million b/d. This means that the Saudis would be required to make a cut of only 320,000 b/d to meet the accord.

According to IEA, Kuwait's April production was only 1.7 million b/d, which if correct would halve its 400,000 b/d production cut.