OPEC cheating reaches New Highs

abarrelfull wrote on 12 Feb 2010 11:21
Tags: iea opec

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As expected, with oil prices remaining strong, OPEC's compliance with its quotas has become ever less.

OPEC's compliance with record supply cuts announced in 2008 slipped to 58 percent in January, from 61 percent the previous month, according to the International Energy Agency.

In the circumstances, its not too surprising. After many months of creep, the crude oil price still remains at relatively high levels. Interestingly, OPEC is happy with the unofficial increases.

OPEC will meet next on March 17 in Vienna. The group's Secretary-General Abdalla El-Badri said on Feb. 2 that if market conditions change little and prices stay in their current range, then ministers will be “reluctant” to alter their production target at next month's gathering.

So cheating is being rewarded.

The original cuts were 4 million barrels per day, and the actual cuts have now fallen to only 2.2 million.

This all has a significant impact on the oil market this year. We can comfortably expect that rising prices will be met by increased production, and so expectations of flat oil prices seem reasonable. What is more difficult to understand, is why this slippage, is not yet impacting significantly on heavy crude differentials.

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