Opec yet to formalise rise in cartel's output
news.ft.com By Carola Hoyos in Vienna Published: January 12 2003 13:08 | Last Updated: January 12 2003 13:08
Saudia Arabia has so far failed to rally its Opec colleagues around formalising an increase in the cartel’s oil production quota.
Instead Opec members have already begun to informally fill the supply gap left by the shut down of Venezuela’s oil production, oil ministers said ahead of their meeting to be held in Vienna on Sunday.
Ali Naimi, Saudi Arabia’s oil minister said today: “There is not a shortage [of supply] in the international market, there is only a shortage from Venezuela, probably of two million barrels per day,” he said. “The feeling of 23m b/d, we will leave it.”
It is still unclear whether Opec will announce new more generous quotas for the nine members who could, at least in theory, help fill the 2-2.5m b/d gap left by a strike against Venezuela’s president which has crippled the country’s oil industry since the beginning of December.
Venezuela’s strike and worries about a possible war in Iraq have driven oil prices to more than $30 per barrel well above Opec’s ideal range of $22-$28.
Opec’s inability to send a strong message to the oil market that it will increase supply will likely dampen any bearish effect on prices that a concrete decision could have had, analysts said.
Much of the increase to fill the hole left by Venezuela has already begun, Opec sources said, but some extra production is still expected to hit the markets in the coming weeks. However incremental barrels from the Middle East would take at least 45 days to reach the US, the market most effected by the loss of Venezuelan exports.
Riyadh, in the past days, had tried to persuade Opec members to increase the cartel’s 23m b/d quota by 1.5-2m b/d, but ran into resistance from countries worried about the seasonal drop in demand in the first two quarters of each year and the subsequent dangers of significant depressed prices if Venezuela’s production was restarted and a US military action against Iraq were delayed. Many producers were also concerned about losing market share to Saudi Arabia, which is the Opec member most able to increase its production. Venezuela, meanwhile, raised objections over it possibly losing its quota share -- even temporarily -- in spite of the fact that it is unable at this point to meet it. Ali Rodriguez, head of Petroleos de Venezuela (Pdvsa) Venezuela’s state-owned oil company, said today that the country’s oil output would return to pre-strike levels by the end of February.
“We will give Opec certainty that we will recovery operations... by the end of February,” Mr Rodriguez said. But analysts doubted the validity of the statement saying that the strike showed little sign of coming to an end and even once it did, it would be months before Venezuela could fully restore its production.