OPEC and Real Oil Production

 

opec

Recently, EIA and other oil market forecasters have been paying close attention to how the Organization of the Petroleum Exporting Countries (OPEC) is adjusting to lower global oil demand and weaker oil prices brought on by the global economic recession. Crude oil prices are now almost $100 per barrel off their peak level last year, and most forecasters, including EIA, are projecting 2009 global oil demand to be over 1 million barrels per day (bbl/d) lower than in 2008. In response, OPEC has met four times during the past 6 months, most recently earlier this month, to consider production cuts to arrest the oil price decline and cut rising oil inventories, which had reached a level not seen in the last 9 years in terms of days of supply in countries belonging to the Organization for Economic Cooperation and Development.

 

OPEC generally holds almost all of the world’s available surplus petroleum production capacity, and its members have frequently intervened over the years to alter production to influence oil prices, usually to support higher prices. During the first quarter of 2009, EIA estimates that OPEC held 43 percent of the world’s production capacity of crude oil and other petroleum liquids. Following OPEC’s most recent round of production cuts, OPEC members’ surplus production capacity had risen to 4.4 million bbl/d, about 5 percent of the total global production capacity of 87 million bbl/d.

 

The outcome from OPEC meetings is never certain because members often have differing opinions on the need for action. OPEC has met 90 times since it instituted its first production targets in 1982, and has left its targets unchanged 41 times. This was the outcome of OPEC’s most recent meeting on March 15, where its members had to weigh their desire for higher prices against concerns that a production cut could jeopardize any recovery in global oil demand and significantly delay any potential price rise well into the future. OPEC decided to encourage its members to adhere to existing targets.

 

OPEC members had previously agreed to lower production by 4.2 million barrels per day from September levels to 24.85 million bbl/d. Measuring compliance with the targeted production cuts is difficult because OPEC did not list individual country targets in its most recent communiqués, but estimates from industry and trade sources are available, and EIA has incorporated them in its estimates of compliance in the table below. EIA’s latest estimate of OPEC crude oil production in February, excluding Iraq (which has been exempt from OPEC production targets for the past decade) shows a decrease of almost 3 million bbl/d from last September. This represents almost 70 percent of the 4.2 million bbl/d cut in OPEC’s production target. As the table below indicates, Persian Gulf producers (Saudi Arabia, Kuwait, the United Arab Emirates, Qatar and Iran) appear to have accounted for 80 percent of the overall cutback over the period, with Saudi Arabia alone having shaved output by 1.3 million bbl/d. All eyes will continue to focus on OPEC producers, especially those outside of the Persian Gulf, to see how much they end up cutting production.

Country

Sept 1

February


Production

Targets

February


2009


Production

February


Compliance


With Cuts 2

Crude Oil


Production

Capacity

Excess


Production


Capacity

Algeria

1,400

1,200

1,420

-10%

1,420

0

Angola

1,760

1,520

1,700

25%

2,050

350

Ecudor

500

430

490

15%

475

0

Iran

3,900

3,340

3,650

45%

3,900

250

Kuwait

2,600

2,220

2,300

79%

2,600

300

Libya

1,720

1,470

1,600

48%

1,750

150

Nigeria

1,990

1,670

1,800

59%

1,955

155

Qatar

850

730

750

83%

1,065

315

Saudia Arabia

9,370

8,050

8,050

100%

10,600

2,600

UAE

2,600

2,220

2,300

79%

2,600

300

Venezula

2,350

1,990

2,200

42%

2,200

0

OPEC ex. Iraq

29,040

24,840

26,210

67%

30,615

4,420

Iraq

2,320

 

2,350

 

2,350

0

OPEC

31,360

 

28,560

 

32,965

4,420

 1 OPEC’s published estimates of September crude oil production that were used to derive current OPEC production targets – these vary slightly from EIA estimates of September 2008 production. 

2 OPEC compliance is calculated by comparing the size of the production cuts that OPEC members made (actual February 2009 production minus September 2008 production) with the targeted cuts (February 2009 production targets minus September 2008 production).

 

Source: EIA

 

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