Hope Rises for Lower Oil Price as OPEC Increases Output
By Chika Amanze-Nwachuku, 11.01.2007
Nigeria and other members of the Organisation of Petro-leum Exporting Countries (OPEC) will today effect the 500,000 barrels per day (bpd) output increase agreed by ministers of the organisation in September.
By this development, Nigeria ’s total output is expected to rise by eight per cent of the new output which translates to a little below 40,000 bpd.
The increase is expected to reduce the pressure on oil price which hit a record $94 yesterday.
Nigeria’s production allocation before the rise in output stood at 2.3 million bpd, but the figures have remained unstable between 2.1m bpd and 2.2million bpd due to the crisis in the Niger Delta which often resulted in production shut-in.
OPEC at its 145th meeting on September 11, in Vienna, Austria , raised output by 500,000 barrels per day, with effect from today (November1). The output increase which was a fallout of a resolution passed by member countries brought total crude oil output to over 27.2 million bpd.
However, oil-rich Iran and Angola which were admitted as members last year were excluded from the new output production.
“From today, all OPEC members, except Iraq and Angola will aim to ship 27.253 million bpd of oil onto the 86 million bpd global market and if Iraq and Angola’s production were added, OPEC will be pumping nearer 31 million bpd”, an analyst told THISDAY last night.
Also contacted, the Group General Manager, Public Affairs, Nigerian National Petroleum Corporation (NNPC), Dr. Levi Ajuonuma, confirmed that Nigeria, like other affected countries, heeded the directive that same September 11, adding that the new output automatically takes effect from today.
Announcing the rise in output in Vienna, the organisation’s Secretary, Abdalla El Badri, had explained that the decision to increase output was as a result of a consensus reached by the member countries, adding that the high demand winter season necessitated keeping the market adequately supplied.
“To this end, the Conference decided to increase the volume of crude supplied to the market by OPEC member countries (excluding Angola and Iraq ) by 500,000 bpd, effective 1 November 2007,” he said.
BBC website reported yesterday that oil prices hit a new record of $94 a barrel as US government data showed a surprise fall in crude stockpiles for the second week in a row.
New York light crude jumped $3.62, or 4 per cent, to $94 a barrel, while London Brent traded at $90.74 a barrel, up $3.30, in late afternoon trade in Europe.
The US government's figures showed that domestic crude stocks fell by 3.9 million barrels last week.
Analysts had forecast an increase of 100,000 barrels.
"I am very surprised, the crude number is insanely bullish, it's a big drop, for the second week in a row," said Mike Wittner, global head of oil research at SocGen in London.
The US is the world's biggest energy consumer and therefore, the state of its inventories is a key concern.
Over the course of Wednesday, prices rocketed by as much as $4 to $5 in highly volatile trade. An array of factors have been driving oil prices higher.
Oil prices have risen as the sliding greenback makes oil, which is priced dollars, cheaper to buy outside the US. The dollar hit its weakest levels against the pound since 1981 on Wednesday.
At the same time, oil investors have been casting a nervous eye on Turkey's threats to carry out a major military incursion into northern Iraq to attack Kurdish rebels.
In past months, there have also been concerns about the stop-start violence in Nigeria's main oil producing region, the international community's unresolved nuclear dispute with Iran and heating supplies for the US winter.
Mexico was forced to halt one-fifth of oil production at the start of the week by a tropical storm hitting its Caribbean coast, sparking further supply fears, but it now expects to resume full production by Wednesday next week. Some analysts expect crude prices to hit $100 a barrel before the end of the year.
