For once, oil producers honor agreed limits to hold up prices

by The Associated Press

Major oil-producing nations are showing unusual discipline in holding to production limits that have doubled oil prices over the past year, an official of the agency that represents oil-consuming nations said Dec. 7.

Robert Priddle, executive director of the International Energy Agency, said worldwide December oil demand of 78 million barrels a day exceeds supply by about 5 million barrels, forcing a drawdown of stocks.

Demand normally is high as winter approaches, but Priddle, meeting with reporters, said the IEA’s assessment suggests that production quotas imposed in March by the Organization of Petroleum Exporting Countries has met with 85 percent to 90 percent compliance.

Producing nations, led by Saudi Arabia and other OPEC members, agreed to the production rollback to counter plummeting oil prices.

The discipline they have shown is extremely rare for OPEC. Almost always in the past, one or more of the major producer-exporters has ignored production limits set to hold down the world’s oil supply and thus bolster prices.

During the past year world oil prices have soared from about $10 a barrel to as much as $25 a barrel. Despite the increases, demand remains strong, Priddle said.

But soaring prices are not enough to prompt nations to release emergency oil stockpiles, he said, because such stocks are created to deal with interruptions in supply and acute shortages.

The International Energy Agency, based in Paris, was created during the oil shocks of the 1970s to coordinate consumer-nation response to interruptions in supply. The only time it has released emergency oil stocks held by member nations was during the six-week Persian Gulf War against Iraq in January and February 1991.

Now, Priddle said, “There are plenty of oil stocks around the world.”