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OPEC leaves production quotas unchanged
Energy Information Administration expects crude oil supplies to remain tight, but does not expect a long-term suspension of Iraqi production Petroleum News Alaska
The Organization of Petroleum Exporting Countries 10 (OPEC excluding Iraq) agreed June 5 to leave production quotas unchanged despite Iraq’s decision to suspend all Iraqi oil exports sanctioned under the United Nation’s oil-for-food program effective June 4 but will review the impact of Iraqi oil export cuts at an extraordinary meeting on July 3.
The Department of Energy’s Energy Information Administration said June 7 that Iraqi efforts to end U.N. sanctions resulted in lowered exports from last December through February of this year. Iraq rejected the latest efforts to revise the sanctions — the “smart sanctions” proposals advanced by the United States and the United Kingdom — and also rejected a one-month rollover of the U.N. oil-for-food program that was adopted to allow for further study of the proposal.
On June 4, Iraq suspended its oil exports under the U.N. oil-for-food program, and stopped pumping oil into the Iraq-Turkey pipeline.
The EIA said it is not assuming a long-term stoppage of Iraqi exports but is assuming that Iraqi production in 2001 will not exceed the 3 million barrel per day level reached as recently as last October. World oil markets continue tight The EIA said OPEC members offset their February and April quota cuts to a large extent by producing above quotas. The agency said it estimates that although the OPEC 10 cut their production by more than 200,000 barrels per day in May, OPEC 10 production was still more than 600,000 barrels above quota levels cuts.
The agency said its analysis indicates that even prior to the Iraqi suspension of exports, world oil markets would have continued to be tight. With the loss in Iraqi exports, EIA expects OPEC production above current quota levels to increase regardless of whether OPEC raises production quotas or triggers its price-band mechanism.
The loss of all Iraqi U.N.-sanctioned oil exports for even one month, equivalent to the loss of 60 million barrels of oil, is sizable enough to cancel much if not all of the inventory build that world oil markets normally expect for this time of year.
EIA expects non-OPEC production to increase by another 0.4 million barrels per day in 2001, with much of this increase coming from Russia. Although the Caspian Pipeline Consortium has begun filling its new pipeline to transport oil from Kazakhstan to world markets, this is not expected to support greater Caspian production levels until end-2001.
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