OPEC views vary on oil cuts

Oil ministers are at odds over whether to cut production by 1 mln barrels a day to stabilise falling oil prices — as announced two weeks ago – from quotas or from actual output.

Proposals for the 1 mln bpd cut had broad support from within the Organisation of Petroleum Exporting Countries (OPEC). But consensus on the baseline for the cuts and whether, when and where to hold an emergency meeting to formalize them continue to elude ministers.

By most assessments, there is less than 500,000 bpd between the two starting points of quotas or actual output. But the total production figure for the OPEC-10 members (excluding Iraq) hides some uncomfortable facts.

While oil markets have focused on OPEC’s ability to grow output to meet rising demand, significant changes in production capacity have occurred among individual member countries.

Some of the small OPEC producers such as Algeria, Libya and Qatar have successfully developed additional oil production capacity taking them well above their quotas. On the other hand, some of the organisation’s major producers, including Iran, Venezuela and Nigeria, have struggled for various reasons to meet their own quota allocations.

As the need for production discipline re-emerges after nearly three years of hibernation, OPEC’s birds are coming home to roost.

Iran, Venezuela and Nigeria are reluctant to support any agreement that appears to formalize a lower internal market share for them within OPEC, which would be the case with an agreement to cut from production levels. (source: MEES)