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OPEC Splits Over Production Quotas
•Oil prices rise further By Mike Oduniyi with Agency report, 12.01.2004
Members of the Organi-sation of Petroleum Exporting Countries (OPEC) are divided over production quotas that will be in place beginning January next year. The division is coming ahead of the organisationâ??s extra-ordinary meeting slated for December 10 in Cairo, Egypt. While OPEC heavy weights including Saudi Arabia, Nigeria and Venezuela want the current quota of 27 million barrels per day (bpd) maintained, Iran, a key member, wants the organization to cut down on production. However, the uncertainty in supply levels coupled with the cut of 280,000 bpd of oil from Norway, led to a further increase in oil prices at the international market. The US Light sweet crude closed 34 cents higher at $50.10 a barrel and Brent rose by 70 cents to $46.45 per barrel. OPEC ministers are meeting to review market developments and take measures deemed appropriate to stabilize the current volatile market. According to Nigeriaâ??s Presi-dential Adviser on Petroleum and Energy, Dr. Edmund Daukoru, although an increase in the output by OPEC member-countries in the last one month had helped check spiraling oil prices, this was not enough to cut down on production. Daukoru said Nigeria would want to see oil prices eased further "to protect global economic growth." This position, however, might not be unconnected to the adverse implication of a high crude price on Nigeria domestic fuel prices since the country depends largely on importation. Despite Federal Govern-mentâ??s agreement with the Nigeria Labour Congress (NLC) to drop petrol price to N49 per litre, kerosene and diesel at N52 a litre each, marketers are selling the products above the agreed prices, citing high oil prices in the international market. "There are two shades of opinion. One believes that current price levels are okay. The second, that we should bring prices down. I belong to the more moderate camp," said Daukoru, who will assume the post of OPEC Alternate President from next January. "Cutting is psychologically difficult. As for raising, there is a structural problem," he added. He said if the OPEC basket had collapsed below $30 per barrel, then there would be alarm which may make the group to cut. "Right now, we wouldnâ??t need to do it. The market is able to take what we are producing," said Daukoru. His position received support from Saudi Arabia, OPEC biggest producer. The countryâ??s Oil Minister, Ali Naimi, threw his weight behind keeping OPEC's quotas unchanged when the producer group meets next week. "The market today is in balanceâ?¦Supply is a little bit ahead of demand and inventories are building comfortably," he said. Iranâ??s OPEC governor Hossein Kazempour Ardebili, however, canvassed that OPEC cuts quota. "The Oil markets are oversupplied by some two million bpd and OPEC should cut supply to official quota levels," Ardebili said. OPEC president Purnomo Yusgiantoro, said yesterday that members, excluding Iraq, were producing at 1.5 million bpd above the OPEC-10 quota of 27 million bpd. "If we include Iraq, the overproduction is 2.5 million b/d," Purnomo said. The group has encouraged its members to produce as much crude oil as they can to help bring oil prices down. Purnomo repeated that OPEC is predicting global oil demand will slump in the second quarter of 2005. Oil accounts for more than 90 percent of Nigeriaâ??s foreign exchange earnings. The countryâ??s current OPEC quota is 2.224 million bpd.
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