http://www.ft.com/cms/s/7429363e-4fdf-11db...00779e2340.html
By Carola Hoyos in London - Financial Times - September 29 2006
QUOTE
Venezuela and Nigeria, both members of the Opec oil cartel, on Friday announced that they would reduce their oil production by as much as 200,000 barrels a day to shore up prices.
Several other key members of the Organisation of the Petroleum Exporting Countries were said to be furious about the unilateral decision.
Nevertheless, data due to be released in the next few weeks are expected to show those other members, which include Saudi Arabia, Iran, Kuwait and the United Arab Emirates, are also reducing output but keeping quiet about the measure.
Saudi Arabia and Kuwait are both allies of the US, the world’s biggest oil consumer, and do not want to be seen trying to boost prices that are still relatively high at $60 a barrel.
Nonetheless, they are concerned about the speed with which prices have slipped from $75 over recent weeks and want to ensure that their oil, which trades slightly below the price of international benchmark crudes, does not fall below the $50 mark.
To that end, and because refineries are demanding less oil because of scheduled maintenance closures, Saudi Arabia is seen as having already cut production by 200,000 barrels a day, with another 200,000 being cut by Kuwait, Iran and the UAE.
Nigeria is cutting 120,000-150,000 barrels a day, while Venezuela is expected to cut 50,000 b/d. The total cuts would reduce Opec production to 27m b/d, a 600,000 b/d fall in two months. But oil prices did not rise significantly on the news.
Nigeria is already producing fewer barrels than its Opec quota allows because of militant attacks on oil facilities in the Delta region.
Neil McMahon, analyst at Sanford Bernstein, said: “I can’t see it [the move by Nigeria and Venezuela] stabilising the price for long because Opec could turn on the tap again at any moment.” He noted that spare oil capacity had doubled in just a year and is now at 3m b/d.
He said the price fall had been prompted by a slowdown in demand. The US Department of Energy this week showed US demand in July had fallen by 1.3 per cent from a year earlier.
Several other key members of the Organisation of the Petroleum Exporting Countries were said to be furious about the unilateral decision.
Nevertheless, data due to be released in the next few weeks are expected to show those other members, which include Saudi Arabia, Iran, Kuwait and the United Arab Emirates, are also reducing output but keeping quiet about the measure.
Saudi Arabia and Kuwait are both allies of the US, the world’s biggest oil consumer, and do not want to be seen trying to boost prices that are still relatively high at $60 a barrel.
Nonetheless, they are concerned about the speed with which prices have slipped from $75 over recent weeks and want to ensure that their oil, which trades slightly below the price of international benchmark crudes, does not fall below the $50 mark.
To that end, and because refineries are demanding less oil because of scheduled maintenance closures, Saudi Arabia is seen as having already cut production by 200,000 barrels a day, with another 200,000 being cut by Kuwait, Iran and the UAE.
Nigeria is cutting 120,000-150,000 barrels a day, while Venezuela is expected to cut 50,000 b/d. The total cuts would reduce Opec production to 27m b/d, a 600,000 b/d fall in two months. But oil prices did not rise significantly on the news.
Nigeria is already producing fewer barrels than its Opec quota allows because of militant attacks on oil facilities in the Delta region.
Neil McMahon, analyst at Sanford Bernstein, said: “I can’t see it [the move by Nigeria and Venezuela] stabilising the price for long because Opec could turn on the tap again at any moment.” He noted that spare oil capacity had doubled in just a year and is now at 3m b/d.
He said the price fall had been prompted by a slowdown in demand. The US Department of Energy this week showed US demand in July had fallen by 1.3 per cent from a year earlier.