OPEC Meets Only Half Its Goal of Reducing Production

The Organization of Petroleum Exporting Countries (OPEC) last month fulfilled just half its December pledge to remove around 1 million barrels per day (b/d) of crude oversupply, with most of the cuts coming from Saudi Arabia, a Platts survey of OPEC and oil industry officials showed.

Total OPEC output in January, including that of Iraq, fell by 460,000 b/d to 29.29 million b/d in January from December's 29.75-mil b/d, the survey showed. Excluding Iraq, which does not participate in OPEC output pacts, production from the ten members with quotas under a 27 million b/d ceiling averaged 27.44 million b/d, a drop of 470,000 b/d from December's 27.91 million b/d.

"With prices on the way back up, it's less likely that OPEC will move further toward the goals it established late last year," John Kingston, Platts' Global Director of Oil, said. "The temptation to push out more oil rises as the price climbs. That combination may be setting the stage for lower prices in the second quarter, which traditionally is the weakest demand period of the year."

Kingston added that the February numbers may see some further reduction from Saudi Arabia, about 100,000 b/d. Beyond that, he said, further cuts were unlikely.

Only five of the seven OPEC members which in December pledged to remove supply from the market actually reduced output. Saudi Arabia accounted for the biggest single cut, slashing 400,000 b/d of crude production to bring its output down toward the 9 million b/d that Saudi oil minister Ali Naimi recently said the kingdom was now pumping.

Smaller reductions of 20,000 b/d each came from Kuwait, Libya and Qatar and 80,000 b/d from the UAE. Algerian production remained unchanged from the December level of 1.29 million b/d, while Nigeria, whose production has been regularly affected by community disturbances, boosted production by 20,000 b/d to 2.3 million b/d.

Indonesia and Iran, neither of which undertook to participate in the output cut agreed to in December because they had been pumping within their quotas, kept production unchanged at their respective December levels of 960,000 b/d and 3.9 million b/d. Venezuela, which also opted not to participate in the cut, boosted output by 50,000 b/d to 2.7 million b/d but was still more than 400,000 b/d below its 3.1 million b/d quota.

January saw Iraqi production and exports again constrained by a combination of sabotage, power cuts and bad weather. Pipeline shipments of Kirkuk crude from the north to Turkish Mediterranean port Ceyhan have been halted since December 18 because of sabotage and there are no plans to resume flows until the pipeline is thought to be secure.

At OPEC's recent January 30 meeting in Vienna, ministers opted to retain the current 27 million b/d ceiling but empowered OPEC president Sheikh Ahmed Fahed al-Sabah, who is also Kuwait's oil minister, to call for a further cut in output ahead of the next scheduled meeting on March 16 in Isfahan, Iran, if necessary.

A country-by-country breakdown of production, with figures in the millions of b/d.

    Country                    Jan          Dec          Nov          Oct
    Algeria                  1.290        1.290        1.280        1.270
    Indonesia                0.960        0.960        0.950        0.950
    Iran                     3.900        3.900        3.950        3.950
    Iraq                     1.850        1.840        1.800        2.200
    Kuwait                   2.400        2.420        2.420        2.420
    Libya                    1.610        1.630        1.610        1.610
    Nigeria                  2.300        2.280        2.380        2.400
    Qatar                    0.780        0.800        0.800        0.800
    Saudi Arabia             9.100        9.500        9.500        9.550
    UAE                      2.400        2.480        2.480        2.500
    Venezuela                2.700        2.650        2.650        2.650
    Total                   29.290       29.750       29.820       30.300
    W/out Iraq              27.440       27.910       28.020       28.100