OPEC April cutbacks less than promised

OPEC crude oil production [20,211 bytes] The Organization of Petroleum Exporting Countries (OPEC) cut production significantly in April, but not as much as markets had hoped. Yet Brent crude oil prices continued to drift slowly upwards in London trading. On May 12, prompt-delivery Brent closed at $14.64/bbl, up 7¢ on the day, while June-delivery Brent closed at 15.25/ bbl, up 27¢. In late March, OPEC countries promised total production cutbacks amounting to 1.245 million b/d, while

May 18, 1998

2 min read

OPEC crude oil production [20,211 bytes]

The Organization of Petroleum Exporting Countries (OPEC) cut production significantly in April, but not as much as markets had hoped.

Yet Brent crude oil prices continued to drift slowly upwards in London trading. On May 12, prompt-delivery Brent closed at $14.64/bbl, up 7¢ on the day, while June-delivery Brent closed at 15.25/ bbl, up 27¢.

In late March, OPEC countries promised total production cutbacks amounting to 1.245 million b/d, while other major exporters pledged to trim exports (OGJ, Mar. 30, 1998, p. 23).

But Middle East Economic Survey (MEES) reports that OPEC's April production averaged 28.345 million b/d, which was a reduction from the 28.82 million b/d produced in March but one less than promised (see table).

Prices for Brent crude are widely expected to drift at $14-15/bbl, as traders wait on the next OPEC meeting, scheduled to take place in Vienna on June 24, at which the need for further cutbacks is expected to be debated.

Brent prices were earlier given a boost when Sheik Saud Nasser Al-Sabah, Kuwait's oil minister, said he intends to push for further production cuts at the OPEC meeting because "the international oil market is oversaturated."

MEES attributed part of the shortfall in OPEC cutbacks on Iraq, which boosted output under its oil-for-aid agreement with the United Nations, but which was omitted from the cutbacks agreement.

Of those countries included in the pledge, MEES highlighted Iran as the only country that actually increased output rather than reduced it in April. Iran claims to have been producing at its OPEC quota level of 3.942 million b/d before the agreement, and to have therefore met the 140,000 b/d cutback promise.