Browse
related articles
After falling almost 25 per cent since last August crude benchmark prices have settled at $55-$62. The impact of the OPEC cuts of 1.2 million barrels-a-day in November has been diluted though by the reluctance of many of the cartel's members to actually make the reductions promised.
OPEC ministers are quoted as saying that 80 per cent of the cuts have been implemented. Others however, put implementation at not much more than two thirds.
Such hesitancy has proved damaging to OPEC efforts to control prices in the past but Gulf producers led by Saudi Arabia seem more determined now to make the cartel's decisions count.
Supply cuts
In December, the cartel decided to reduce production by a further 500,000 b/d from February 1. The decision to delay implementation gives OPEC leeway to avoid making the cut if world oil demand grows as a result of a more severe winter than expected or stronger than predicted global economic growth.
Current benchmarks seem to be within the comfort zone for most oil producing nations but the elusive prize is a strategy leading away from sudden wild price fluctuations.
Shortly before crude soared to $80 a barrel in August 2006, BP's chief executive Lord Browne predicted that crude prices could dip below $25 a barrel within a decade. He based this on new oil finds in the Caspian Sea, increased production from West Africa and Russia and improved productivity in extraction methods.
While some support was given to Browne's forecast with prices tumbling $20 from their peak, his scenario is not shared by traders. Barclays Capital head of energy research Dr Paul Horsnell, says that banks trade long term even 15 years ahead but no such deals indicate oil falling below $60 a barrel.
Long term demand
The International Energy Agency predicts that the current average global demand of 84 million b/d, for oil will increase to 99 million b/d by 2015 and to 116 b/d by 2030.
The IEA also believes that any capacity additions over the period could be small "on account of shortages of skilled personnel and equipment, regulatory delays, cost inflation, higher decline rates at existing fields and geopolitics." Three quarters of spending will be used just to maintain current output levels in areas of production, the agency says.
In the uncertain market conditions predicted, OPEC seems to be planning a more assertive and strengthened role. In line with this, Angola which some analysts believe contains as much untapped oil as the Middle East was also formally accepted as OPEC's twelfth member at the organisation's December summit in Abuja.
