Iraqi Dinar Discussion Board

[stockings3333]

Is OPEC still in control?

--------------------------------------------------------------------------------

Although the Organization of Petroleum Exporting Countries (OPEC) head of States refused to discuss production level and how to curb rising crude oil prices in the international market at its November 17 meet in Riyadh , Saudi Arabia, this has become nightmare to many countries as they struggle to keep their economy alive.
Though the organization has pumped additional 500,000 barrels into the market with a new production ceiling of 27.2 million barrels a day from its previous quota of 25.8 million barrels a day since November, it has been no hold back as prices hovered close to $100 per barrels from $78 in August. Quite a number of reasons have been posited. At initial stage, it was attributed to OPEC indiscipline, and renewed geopolitical tensions; robust Asian demand and a weak US dollar have worked nicely for oil bulls. This was shifted to economical uncertainty and risks to oil demand brought on by the turmoil in financial markets. Whatever the cause may be open insisted that the world economic performance in 2007 is expected to remain relatively firms, and slightly lower than in 2006.
Can production meet demand?
In spite this OPEC’s 10 members’ production according to the United States based International Energy Agency (IEA) could increase by 1.2 million bbl/d by the fourth quarter of 2007 when compared with fourth quarter 2006 levels and also boost crude-oil to 31.4 million barrels a day in 2008.
“In 2008, EIA expects that OPEC will increase production slowly, to an average of 31.4 million bb/d, in order to manage inventories and maintain price,” the EIA said order to manage inventories and maintain prices,” the EIA said.
OPEC, excluding Iraq and Angola , pumped 26.39 million barrels a day in the second quarter of 2007, according to the EIA and with Iraq and Angola , produced 30.09 million barrels a day in the period.
According to EIA rising demand for OPEC crude is expected to keep pace with increases in oil production capacity, meaning that surplus capacity will probably stay in the range of 2 million – 3 million barrels a day Non-OPEC production is expected to grow by roughly 0.7 million bbl/d in 2007 and 0.8 million bbl/d in 2008 (this excluding OPEC non-crude oil production growth of about 160,000 bbl/d in 2007 and 260,000 bbl/d in 2008). Output growth from non-OPEC countries reflects strong gains from new projects in the Caspian Sea , Russia , Africa , Brazil , and the United States . Declining production from mature basins in the North Sea , the Middle East , Mexico , and Russia will limit the growth potential from the new projects.
EIA’s consumption and supply projections suggest commercial oil inventories in countries within the Organization for Economic Cooperation and Development (OECD) could decline by 1.0 million bbl/d in the first quarter (compared with an average inventory draw over the past 5 years of 0.3 million bbl/d). Even though new capacity increases are expected over the forecast period in OPEC – 10 countries (particularly in the Persian Gulf ), continued strong demand growth will limit OPEC’s spare capacity cushion. On balance, EIA expects OPEC spare capacity to average over 2 million bbl/d in 2007 and 2008 compared with an average spare capacity of 1.3 million barrels per day in 2006.
OPEC’s indiscipline
OPEC within the last two years has held series of meetings to ensure that its members’ interests are protected with rising crude oil prices in the international market. For instance, it held two meetings in Doha , Qatar , last year and then in Nigeria , two months later where their decision to withdraw a total of 1.7 million barrels per day of crude oil from the international market was made known. The first accord in Doha , which came into effect on November 1,2006 reduced the production ceiling by 1.2m b/d to 26.3m b/d, while the second agreement entailed a further cut of 500,000 b.d and came into force on February 1, 2007.
.The new production target set has effectively erases most of a prior agreements made late last year for those 10 nations to cut production by 1.7 million barrels a day, to 25.8 million barrels a day. The new target of 27.2 million barrels a day is for those same 10 members, which excludes Iraq and Angola .
Even with the ceiling many of its members have many a times cut over produced and hardly adhered to quota allocation.
Future reserves
OPEC countries are leading others in crude oil reserves. According to current estimates, more than three-quarters of the world oil reserves are located in OPEC countries. The bulk of OPEC reserves are located in the middle East with Saudi Arabia , Iran and Iraq contributing 56 per cent to the OPEC total.
Even with the big increases in reserves were led by Brazil and Kazakhstan in 2006, OPEC added over 99 billion barrels of reserves, substantially more than the reserves additions made by other crude oil producers in the world.
Though OPEC reserves are increasing experts, are of the view that the world is currently producing more oil annually than it is replacing with new reserves. According to survey, global oil reserves declining by almost 13 billion barrels, or 0.9 per cent, over the last two years to 1.459 trillion bbl at the end of 2006 on a “proved plus probably” basis. The main reason for the poor performance in growing reserves, analyst said is a lack of additions to reserves from new discoveries, which account for 20 per cent or less of additions in the last few years. The high oil prices and sharply increased upstream spending budgets of most oil companies have not yet provided any significant improvement in global additions to reserves. The 10 leading crude oil reserves countries are Saudi Arabia with 288.6 billion barrels, Canada 178.6 Iran 133.1, Russia 124.7, Iraq 99.2, Venezuela 89.5, US 79.7 UAE 58.8, Kuwait 55.8 and Kazakhstan 41.4.
Demand for oil
Global oil consumption is expected to increase by over 1.4 million bbl/d in 2007, compared with a growth rate of 1.2 million bbl/d in 2006. But OPEC in its estimate said oil demand will rise by 1.3 million barrels per day in 2007, less than 2006 expansion of 1.4 million bpd,. China accounts for about one-third of the project growth in world oil consumption. Consumption growth is projected to average 1.5 million barrels per day in 2008. OPEC forecasts world oil demand next year will average 85.9 million bpd. Its growth projection is lower than that of the International Energy Agency (IEA). IEA, in a report estimated global oil demand in 2007 will rise by 1.57 million bpd, up from 1.21 million bpd in 2006.
The slowdown in demand and a surge in supply will lower the need for OPEC’s oil next year. Demand for OPEC oil in 2007 will drop by 700,000 bpd to 28.3 million bpd, the report said.
Save as stakeholders mondilo

http://www.businessdayonline.com/energy/3172.html