ORGANIZATION of Petroleum Exporting Countries (OPEC) members may have to cut production in 2010 as well, similar to what they did in 2009. Although oil prices have stabilised and there are signs of a recovery in the global economy, doubts about the sustainibility of the recovery linger. The picture is not yet clear on the demand outlook for oil in 2010, while the market continues to remain well-supplied with high inventory levels. This was the major concern with which the 12-member OPEC met on Tuesday in Angola.
In 2009, OPEC members cut back on their oil production sharply, following the economic turmoil and market crash in 2008. However, crude production from non-OPEC countries gained steadily. The International Energy Agency’s data show that OPEC’s oil production was lower by 2.7 million barrels per day (mbpd) in 2009 whereas non-OPEC production rose by 0.5 mbpd. The scene is unlikely to change even in 2010. The non-OPEC production is expected to rise further by another 0.8 mbpd to 51.9 mbpd in 2010, while the production of natural gas liquids (NGLs) will add another 0.8 mbpd to supply. These increases are expected to prove sufficient for taking care of whatever incremental demand comes up in 2010 from the ongoing recovery in the global economy. In other words, to support the prices by maintaining the demand-supply balance, OPEC will have to produce even lesser in 2010 than it was producing in 2009.
This phenomenon is ultimately resulting in the world’s reduced dependence on OPEC. Nearly 34.7% of the world’s oil was being produced by OPEC in 2004, which went up to 36.1% in 2008. However, this has come down to 33.7% in 2009 and is expected to reach 33.1% in 2010. Even as they are cutting back on production, OPEC members are also investing heavily in increasing their production capacities. It was not surprising, therefore, that in his opening remarks for the OPEC Conference, Angolan petroleum minister Josi Maria Botelho de Vasconcelos stressed the need for all petroleum producing countries — OPEC as well as non-OPEC — to come together to balance the market.
The final outcome of the OPEC Conference to leave the earlier decided quotas at 24.845 mbpd was in accordance with market expectations. However, the compliance with this quota has been steadily reducing. OPEC’s latest report puts the total production by 11-member countries at 26.6 mbpd or nearly 1.8 mbpd higher than the quota. The slippage, if continues unchecked in future, can add pressure on global oil prices.
Although OPEC countries are temporarily feeling the heat of the situation, they are going to rule the oil market in the years to come. Nothing makes it clearer than the fact that these 12 countries put together control over one trillion barrels of oil reserves, which is nearly threefourths of the world’s total proven oil reserves.
In 2009, OPEC members cut back on their oil production sharply, following the economic turmoil and market crash in 2008. However, crude production from non-OPEC countries gained steadily. The International Energy Agency’s data show that OPEC’s oil production was lower by 2.7 million barrels per day (mbpd) in 2009 whereas non-OPEC production rose by 0.5 mbpd. The scene is unlikely to change even in 2010. The non-OPEC production is expected to rise further by another 0.8 mbpd to 51.9 mbpd in 2010, while the production of natural gas liquids (NGLs) will add another 0.8 mbpd to supply. These increases are expected to prove sufficient for taking care of whatever incremental demand comes up in 2010 from the ongoing recovery in the global economy. In other words, to support the prices by maintaining the demand-supply balance, OPEC will have to produce even lesser in 2010 than it was producing in 2009.
This phenomenon is ultimately resulting in the world’s reduced dependence on OPEC. Nearly 34.7% of the world’s oil was being produced by OPEC in 2004, which went up to 36.1% in 2008. However, this has come down to 33.7% in 2009 and is expected to reach 33.1% in 2010. Even as they are cutting back on production, OPEC members are also investing heavily in increasing their production capacities. It was not surprising, therefore, that in his opening remarks for the OPEC Conference, Angolan petroleum minister Josi Maria Botelho de Vasconcelos stressed the need for all petroleum producing countries — OPEC as well as non-OPEC — to come together to balance the market.
The final outcome of the OPEC Conference to leave the earlier decided quotas at 24.845 mbpd was in accordance with market expectations. However, the compliance with this quota has been steadily reducing. OPEC’s latest report puts the total production by 11-member countries at 26.6 mbpd or nearly 1.8 mbpd higher than the quota. The slippage, if continues unchecked in future, can add pressure on global oil prices.
Although OPEC countries are temporarily feeling the heat of the situation, they are going to rule the oil market in the years to come. Nothing makes it clearer than the fact that these 12 countries put together control over one trillion barrels of oil reserves, which is nearly threefourths of the world’s total proven oil reserves.
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