The decrease in production is the result of the strike in Venezuela that has reduced the country's exports by nearly by 1.9 million b/d to 1 million b/d in December, compared to 2.9 million b/d in November.
December production by the ten OPEC members bound by quotas dropped to 22.85 million b/d from 24.51 million b/d in November. This exceeds the 21.7 million b/d ceiling in effect through December by 1.15 million b/d, however, it comes under the newly adjusted ceiling of 23 million b/d, which took effect on January 1, 2003.
"Venezuela's production of 1 million b/d, as reported in our survey, is an average since Venezuelan production is now far below that and the actual number is in dispute," said John Kingston, Global Director of Oil for Platts. "There is no end in sight to this situation, and the question has become whether OPEC nations, faced with both the Venezuelan strike and the possible loss of exports from Iraq, can fill the gap. It's the group's version of a two-front war."
In anticipation of a possible supply crunch resulting from the Venezuela strike, OPEC will hold an emergency meeting on Sunday, January 12, 2003, in order to agree on a possible production increase. The meeting will take place two days before the OPEC basket completes the 20 days above the cartel's $22-28/bbl target range that would trigger the release of an additional 500,000 b/d of crude.
According to the Platts' survey, the view within OPEC is that an increase of 500,000 b/d will not offset the lost Venezuelan output to bring the OPEC basket back below $28/bbl. Saudi Arabia is understood to support an increase of at least 1.5 million b/d, while several other members would prefer to limit the increase to 1 million b/d.
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