September OPEC Meeting: A Little Brighter, but Still Waiting to See
Buoyed by steady prices and stable inventories, the Conference of OPEC Ministers at its Sept. 9-10 meeting agreed to maintain current oil output levels. OPEC’s action confirmed our predictions (See: “OPEC Watch: Fall Meeting Preview,” Abraham Energy Report, Vol. 1, Issue 7) and those of many market analysts going into the 154th (Ordinary) Meeting in Vienna.
Comments by Ministers leading up to the meeting all pointed to keeping the status quo, given that the improving economic outlook and relative stability in the market has kept oil prices close to $70 per barrel. This is a price OPEC views as being satisfactory, in that it is good for both producers and consumers alike.
May OPEC Meeting: Looking Past the Fundamentals, Hoping For Recovery
We’ll take it! As was widely expected, OPEC Ministers meeting in Vienna on May 28 had little trouble reaching an agreement to maintain their current output ceiling of 24.845 million barrels per day (mmbd). The fact that the fundamental outlook for economic growth and oil demand remains bearish, that inventories are still near record levels, and that compliance with the group’s production ceilings has slipped a bit since their last meeting didn’t really matter. The overriding fact that prices were up anyway seems to have allowed OPEC Ministers to look past their differences and come to a swift agreement. Algerian Minister Chekib Khelil reportedly told reporters after the meeting that “we get along better when prices are improving.”
The one-page communiqué issued at the end of the meeting recognized the severe and broad impact the ongoing global economic downturn was having on world oil demand, and that this weakness was likely to persist for some time. It recognized that some positive economic indicators now point towards the possibility of the recession bottoming out before year-end, but that rising unemployment, shrinking world trade and weak industrial production are still major concerns. It also recognized the positive effect that OPEC’s past production decisions have had on restoring some stability to oil prices, but that crude supplies entering the market were still in excess of actual demand and inventories remain near record levels.
Salazar’s Expanded Energy Profile in Obama Administration
When President Obama nominated U.S. Sen. Ken Salazar to serve as Secretary of Interior, many thought the Colorado centrist would focus most of his attention on addressing traditional interior department issues such as water and land use.
Yet Salazar’s first few months in office have proven his portfolio extends far beyond the DOI’s field of traditional issues, and he has been called upon time and again to serve as both spokesman and cheerleader for the administration’s evolving energy policies.
March OPEC Meeting: The End is Near (Maybe)
OPEC Ministers met in Vienna on March 15 to review trends in the oil market, global economy, and the adequacy of their three previous attempts to reduce oil production in line with declining global demand. They also examined the degree of each OPEC Member’s compliance with the existing production quotas set at their last meeting in December 2008.
Against the background of an extremely weak and fragile global economic outlook and continuing erosion in the demand for oil, they agreed that no further cuts in their production ceilings (quotas) were needed at this time. They also agreed that a continued high level of compliance with the existing production quotas, now estimated to be near 80 percent, is of paramount importance to the success of their attempts to stabilize oil prices in the months ahead. Full compliance would remove an additional 0.8 million barrels per day (mmbd) from the market.
Launching an Energy Tech Revolution
The Big Three automakers teeter on the edge of bankruptcy, the economy continues to slide, jobs are lost and credit remains elusive. In the midst of all the bad news, one economic number is giving people hope—the price of oil, which is around $100 cheaper than just a few months ago. This bright spot is, however, a mirage that could create a false sense of ease for consumers. Bottom line: The energy crisis is not going away. It will come roaring back once the world economy starts growing again.
How we meet this challenge is clearly a top national priority. While many energy issues, such as the fate of offshore drilling and climate policy, will be resolved in the political arena, one subject on which all sides seem in agreement and President Obama has championed, is the need to allocate significant new government R&D resources toward developing advanced energy technologies. However, with today’s weak economy and skyrocketing federal deficits, the question becomes, “How can we ignite an energy tech revolution in these tight fiscal times?” We have some suggestions.
December OPEC Meeting: Shock Therapy for Declining Demand
Largest Cut in History. OPEC met in Oran, Algeria on December 17, 2008, and decided to cut 4.2 million barrels per day (mmbd) from their actual September production level of 29.045 for the OPEC 11 subject to production quotas, effective January 1. This amounts to an additional cut of approximately 2.4 mmbd from the October production quota level of 27.308, and a cut of 2.9 mmbd from estimated November production, if the cuts are fully implemented.
While this is a somewhat confusing way to present their decision, the Algerian announcement would imply a new OPEC 11 production goal of 24.845 mmbd from January 1. When combined with the October agreement, this latest cut represents a cumulative 4.0 mmbd decline from the September quota agreement, and a 4.2 mmbd cut (or 14.4%) in actual OPEC production from September levels.