OPEC RETAINS QUOTAS, WARNS OF NOVEMBER TREMORS
Organization of Petroleum Exporting Countries oil ministers last week agreed to maintain current production ceilings for the rest of 1995.
But they warned the ceiling for 1996 may be raised at its November meeting.
The meeting last week in Vienna was the quietest in recent memory, with hardly a reference to production limits.
Members' ceiling was first set at 24.52 million b/d of oil in September 1993. The agreement has been retained in a bid by OPEC to help raise and stabilize oil prices (OGJ, Aug. 22, 1994, p. 16).
Since then, however, non-OPEC members have been able to hike their production in a period of relatively high and stable oil prices.
"Each OPEC minister expressed concern about levels of non-OPEC production," said an OPEC official after the meeting. "Members think they should have some share of increased demand, but there was no commitment at the meeting to break their resolution on quotas."
The next meeting of OPEC oil ministers is scheduled Nov. 21 in Vienna. Production quotas for 1996 will top the agenda.
"We expect this meeting to register 7.5 to 8 on the Richter scale," the OPEC official said.
PRICE RESPONSE
During last week's meeting, Edwin Arrieta, Venezuela's oil minister, told reporters the production ceiling may no longer be necessary.
That triggered a 520/bbl dip in the price of Brent crude oil to $16.87/bbl by close of trading June 19. Despite the quota accord, prices fell further June 20 to close at $16.74/bbl for August delivery Brent crude.
London's Centre for Global Energy Studies (CGES) said rising non-OPEC production is likely to cause a fall in oil prices in fourth quarter 1995.
Current oil prices are deemed high enough to spur non- OPEC nations to find and produce still more oil.
"New technology has dramatically reduced the costs of finding, developing, and producing oil," CGES said.
"This, along with better exploration and production terms, has created profitable investment opportunities in many non-OPEC countries that can be quickly turned into new output."
CGES reckons OPEC needs new price and investment strategies if it is to increase revenues in the long term.
OPEC actions to raise prices will only encourage non-OPEC producers further, CGES said, and a price war against non-OPEC producers would only cut OPEC's income.
"Recent experience has shown that the pain threshold is higher for OPEC than non-OPEC once revenue requirements are factored into operating costs," CGES said. "Oil companies can invest profitably in production almost anywhere in the world and will continue to do so.
"Ultimately OPEC needs to find some way of diverting upstream investment into its member countries to ensure that they supply the incremental barrel in the future."
CGES believes oil prices have peaked for the year but will not fall much until the end of the summer.
"Once North Sea fields that have undergone maintenance come back on stream toward the end of the third quarter and new fields start up in fourth quarter, prices are set to weak- en.,,
CGES predicts the average price of OPEC basket crudes will be $18.30/bbl for the second and third quarters, sliding to $17.10/bbl in the fourth quarter.
GABON'S PROBLEM
The OPEC official said Gabon's inability to meet OPEC membership payments, which are the same for all members regardless of production volume, was debated at the Vienna meeting.
Gabon's poor economy is the stumbling block.
"The conference thought there are more avenues within the OPEC family to be explored to help Gabon's financial difficulties," the spokesman said.
Copyright 1995 Oil & Gas Journal. All Rights Reserved.