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Thursday, October 18, 2018

OPEC cuts oil production

On 24 September 2003 OPEC decided to cut output from 1 November by 0.9 mbd to 24.5 mbd or by 3.5%. OPEC is thus reversing a quota increase in April when the absence of Iraqi oil from the world oil market and Venezuela's oil strike had contributed to creating a deficit in US oil inventories.

Although the cut came as a surprise to oil markets, OPEC had already begun to voice concerns over supply outstripping demand and falling oil prices in 2004. OPEC had also hinted that the increase in winter demand would probably soak up rising supply in the next few months. Furthermore, OPEC expect that oil supply during the 1st quarter of 2004 may be 2.5 mbd above demand.

The cut in OPEC production quotas is big enough to make way for Iraq's return to the oil market. Iraq's oil minister, present at the OPEC meeting, said Iraq expects to export 1.5 mbd by the end of the year, rising to 1.8 mbd by the end of March 2004. Iraq's oil production reached 1.28 mbd in August, up from 0.85 mbd in July.

OPEC ministers cited rising oil supply from non-quota OPEC member Iraq, and higher production from non-OPEC producers like Russia as reasons for the cut. OPEC agreed to meet again on 4 December, when more cuts could be agreed if the organisation thinks market conditions call for it.

The Brent spot crude oil price rose to USD 26.85 per barrel on 24 September, up 5% on the previous day’s level.

Click here for OPEC oil production and quotas on the INTERTANKO web site

Click here for the world oil supply and demand development.