OPEC rolls over quotas, as oil price falls on Iraq rumors
David KnottThe Organization of Petroleum Exporting Countries (OPEC) has surprised nobody by electing to maintain its current production quotas at its meeting of oil ministers in Vienna late last month.
Senior Editor
After the meeting, OPEC issued a brief statement saying ministers, having reviewed the market situation, agreed to roll over the current overall supply ceiling of 25.033 million b/d until June 1997.
Meantime, oil prices have remained resilient despite the prospect that Iraq may resume exports of oil to world markets in the next week or so under a United Nations-brokered deal to fund humanitarian aid to Iraqi citizens.
OPEC status quo
OPEC members have welcomed recent high oil prices, with Brent crude oil selling at more than $25/bbl in recent weeks, and were expected to do nothing at the meeting that would affect markets.
Most OPEC members have been producing more than their agreed quotas, without affecting prices, because of lower than expected non-OPEC production and earlier collapse of the Iraq/U.N. oil-for-aid scheme (OGJ, Sept. 9, p. 34).
Venezuela and Nigeria have been particularly keen to boost output to gain revenues, and OPEC's average daily output for October was estimated by Middle East Economic Survey at 25.64 million b/d.
OPEC's ministers will next meet to discuss production quotas in Vienna on June 25, 1997.
OPEC's current production quotas are: Algeria 750,000 b/d, Indonesia 1.33 million b/d, Iran 3.6 million b/d, Iraq 1.2 million b/d, Kuwait 2 million b/d, Libya 1.39 million b/d, Nigeria 1.865 million b/d, Qatar 378,000 b/d, Saudi Arabia 8 million b/d, U.A.jpg. 2.161 million b/d, and Venezuela 2.359 million b/d.
Iraqi sales imminent?
Oil traders have become cautious once again since U.N. officials revived the abortive Resolution 986 under which Iraq was to have sold $2 billion worth of oil to pay for food and medical supplies for civilians.
In London trading, Brent crude oil stayed below $23/bbl for a few days after the U.N. announced its latest agreement, despite the fact that neither President Saddam Hussein nor U.S. government is thought eager to complete the food-for-aid deal.
Markets were also depressed by press reports that Turkey's government had said Iraqi oil could be flowing through the export pipeline to the port of Ceyhan by Dec. 15.
Turkey's optimistic comment immediately took 15¢/bbl off the price of Brent crude oil for January delivery, which closed at $22.65/bbl in trading Nov. 28. Since then, however, Brent for January rebounded to $23.78/bbl at closing Dec. 4. Analysts cited continued low stocks of crude and distillates amid strong weather-related demand.
Iraqi deal
On Nov. 25, Iraq and U.N. officials reportedly reached a new agreement on Resolution 986.
There is a sense of deja vu about this development: The U.N. spent months persuading Iraq to agree to Resolution 986, which spells out the deal's conditions, only for Saddam Hussein to begin military shenanigans that led to its cancellation (OGJ, Sept. 9, p. 34).
Julian Lee, oil analyst at London's Centre for Global Energy Studies, said there is an air of desperation about U.N. Sec. Gen. Boutros Boutros Ghali as he tries to get the deal moving again.
"It has become apparent that the U.S. is determined he will not serve another term," said Lee, "yet he has invested a lot of personal capital in Resolution 986. With U.S. elections out of the way, it will be easier to get things moving, and he is keen to put the ball back in the Iraqi court."
Lee said the U.S. government is currently concerned with holding the whole regime of sanctions against Iraq together, particularly in the wake of a visit by a Chinese delegation to Baghdad.
Cutting deals with Baghdad
Middle East Economic Survey (MEES) reported that Iraq's national assembly has approved a production-sharing agreement with China National Petroleum Corp. for development of Al-Ahdab field.
MEES said the deal calls for a 4-year development plan, beginning with analysis of seismic data acquisition to date, leading to estimated production of 80,000 b/d.
French and Russian companies also have secured agreements for Iraqi field developments once sanctions against Iraq are lifted. And China, France, and Russia have been the most vociferous supporters within the U.N. of the revival of Resolution 986 (OGJ, Sept. 16, p. 25).
"Now we have to wait and see whether Saddam wants the deal to go through or not," said Lee. "There have been suggestions that he has gone cooler over recent months on the idea of limited sales, as his personal situation has eased within Iraq.
"It is difficult to decide how serious this all is, but there seems to be a new surge of life through the whole Iraq/U.N. process.
"There is also a growing feeling that the world may need Iraqi oil over winter. This could be one of the biggest spurs to get the deal going again."
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