OPEC: Is there too much oil on the market?

Ministers of the Organization of Petroleum Exporting Countries (OPEC), arrived Saturday in Vienna, maintained the suspense on the outcome of the meeting should focus on Sunday the need to respect the commitments 100% of decline in production taken end of 2008.

•     “There is too much oil on the market,” said Iranian Oil Minister, Gholam Hossein nozari. He refused to indicate whether his country will call for a further decrease of production at the ministerial meeting of OPEC.
  
      “We will work to adhere to 100% decreases in production commitments we have made, said the day before the Venezuelan Oil Minister Rafael Ramirez.
  
      Ministers continued to send confusing signals about the true intentions of the meeting at the headquarters of the organization that provides 40% of world production of black gold.
  
      The OPEC could decide to “maintain its present production quota or an excess of supply would require a further drop in production”, seemed to sum up the Kuwaiti Minister Sheikh Ahmed Abdullah Al Sabah before departing for Austria.
  
      In all cases, the group should draw its members to strictly comply with their respective production quotas to keep the commitments made at the end of 2008.
  
      The current ceiling for OPEC production for 11 of the 12 member countries because Iraq is not subject to quotas, is set at 24.84 million barrels per day (mbd). Since last September, OPEC decided to withdraw from the market 4.2 mbd to stop the fall down in crude prices, which had collapsed to 32.40 dollars in the fall. This would also relieve a market flooded by excess production.
  
      According to the International Energy Agency (IEA), Ecuador and Angola in particular are not meeting their production quotas.
  
      Saudi Arabia, the cartel's largest producer, which has until September also far exceeded its quotas, has provided the bulk of the effort to reduce the market by withdrawing 1.6 mbd on total 4.2 mbd promised.
  
      So the Saudis, which pumped around 9.6 mbd in September, did not extract more than 7.95 mbd in February (according to the IEA), slightly less than their limit of 8.05 mbd.
  
      Faced with this effort, Saudi Arabia could veto a change in production at the Vienna meeting.
  
      Ryad, competing on a barrel to $ 75 as reasonable price, has already stated in an article in the Arabic daily Al Hayat that they wanted a better compliance with quotas before going further. Currently, the barrel is around 44 dollars on the market.
  
      Among supporters of a decline in production, Algeria had noted Wednesday that OPEC faced a new price drop if it disappointed market expectations; operators have already incorporated this scenario.
  
      In addition, the IEA and OPEC's monthly report for March released on Friday, have greatly lowered their forecasts for global oil demand for 2009, and speak of a decline of 1, 2 to 1 mbd that year.
  
      “The answer seems clear: if lower (the production of OPEC), the barrel could reach the 50 dollars threshold; otherwise it will stagnate between 40 and 50” said Olivier Jakob, of the Petromatrix firm.
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• Ennaharonline/ M. Oudina