VIENNA—THE Organisation of Petroleum Exporting Countries (OPEC) is hiking its official output by one million barrels per day effective November with Nigeria getting 82,000 barrels per day or 8.2 per cent of the new quota. Nigeria stands to make an extra $98.4 million per month at the current rate of $40 per barrel.
“The conference decided to raise the OPEC production ceiling, excluding Iraq, by one million barrels per day with effect from November 2004 in order to bring prices down further to a more sustainable level,” OPEC spokesman, Omar Ibrahim, told a news conference in Vienna.
“As long as the price is still high we would like to give the signal, a psychological signal, that we want the price down,” OPEC president, Purnomo Yusgiantoro, said.
But the market was unmoved by the announcement, with analysts saying the new quota was still below OPEC’s real output of some 28 million barrels daily and questioning the cartel’s power to impact on the price.
Iranian Oil Minister, Bijan Namdar Zangeneh, admitted the quota hike would not mean more oil on the market but had been a goodwill gesture to consumers. “I think it is a signal for the market, not more, probably we will witness no change in the total output. We wanted to prove ... that we want to satisfy the consumers and consumer countries,” he said.
His Saudi Arabian counterpart, Ali al-Nuaimi, told reporters the quota hike was decided upon “to narrow the gap between the real production.” OPEC has for the past two months been exceeding its quota in response to record prices that have skirted close to 50-dollars per barrel, pumping some two million barrels per day above the current ceiling since August.
Asked why the powerful oil producers had not raised the quota to 28 million barrels per day (bpd), Nuaimi said the new figure was chosen to enable consensus among member states. “It does not make any difference really,” he added.
Venezuelan Oil Minister, Rafael Ramirez, doubted the quota hike would bring down prices. “We do not think the prices will drop. Unfortunately, the prices are being affected by factors that are not under OPEC’s control. The prices will be high this year and next.”
His words proved true yesterday at least, as world oil prices charged ahead for the third day in a row on news of a plunge in US crude oil stocks and a slump in production in the Gulf of Mexico because of Hurricane Ivan. New York’s main contract, light sweet crude for October delivery, climbed by 56 cents to 44.95 dollars in early deals.
The price of benchmark Brent North Sea crude oil for delivery in October rose by 25 cents to 41.98 dollars in late afternoon trading in London. Yusgiantoro nonetheless said the cartel hoped the quota hike would ease the price of the OPEC basket of seven crude oils from around 38 dollars currently to the low thirties.
“The signal we would like to give out is to drop the price because the price we see today is too high,” he told reporters, adding that the correct price for the basket would be “mid-30, 30-something.” He reiterated that member countries were working to increase OPEC’s spare production capacity of one to 1.5 mbd by another one million barrels towards the end of the year and into 2005 and were able to lift the level even further if necessary.
But the OPEC president warned against over-production while prices were high due to political tensions, which he said had added a premium of between 10 and 15 dollars per barrel. “Once there is a significant easing of some of these pressures — such as an unexpected relaxation of geopolitical tensions — then the crude price could, in turn, spiral down rapidly,” he said in an address at the meeting. “There is a fine line between reaction and over-reaction.”
OPEC also decided yesterday to keep its price band steady at 22 to 28 dollars per barrel, but would look mull an adjustment at its next meeting in Cairo, on December 10, ministers said. Zangeneh of Iran said the members were expecting a report from a panel of experts who have been studying the band, which has been at the same level since it was created in March 2000.
After the meeting, analysts gave a mixed response to the increase in the production quota. “This is good news. The intention is to support the consumer and this is what I think is important right now,” said Pedro Nones, an oil analyst for the Spanish government.
But Pedro Alonso, a freelance analyst from Mexico City, said: “I don’t think that it will have a serious impact (on oil prices) ... nobody is taking this seriously.”
Here are the new daily production quotas for 10 of the 11 members of the Organisation of Petroleum Exporting Countries (OPEC) that emerged following a meeting yesterday of OPEC ministers. The 11th member, Iraq, has been excluded from the quota scheme since its invasion of Kuwait in August 1990.
New oil quota
S/Arabia 8,775,000 (32.5%)
Iran 3,964,000 (14.7%)
Venezuela 3,107,000 (11.5 %)
UAE 2,356,000 (8.7 %)
Nigeria 2,224,000 (8.2%)
Kuwait 2,167,000 (8.0%)
Libya 1,446,000 (5.4%)
Indonesia 1,400,000 (5.2%)
Algeria 861,000 (3.2%)
Qatar 700,000 (2.6%)
TOTAL: 27,000,000 100,0
