Survey says OPEC cuts output by 890,000 BPD in September

OPEC cut its crude output by 890,000 barrels per day in September to produce an average 27.03Mlion barrels per day (MBPD) over the month, but still exceeded its self-imposed ceiling, according to OPEC and oil industry officials surveyed by Platts.

Excluding Iraq, the 10 member countries with quotas cut output by a collective 620,000 BPD to 24.43 MBPD but still exceeded their new 23.201MBPD ceiling by close to 1.23 MBPD. Iraq, whose exports are controlled by the United Nations and which does not have an OPEC quota, reduced production from 2.87 MBPD in August to 2.6 MBPD in September.

OPEC was to implement a cut in its production quotas in place Sept. 1, 10 days before the attacks on the World Trade Center and Pentagon. Since that time, the group has faced declining prices fueled by the prospect of weakening global demand.

``OPEC is faced with a quandary,'' commented John Kingston, Platts' Global Director of Oil. ``It faces a reduction in demand, but it also does not want to be seen reducing output following the attacks on Sept. 11. Its best option to bridge that problem might be to seek greater compliance with the Sept. 1 quotas. That would make more sense than to talk about a new production cut which, if it happened, is bound to make compliance look even worse, and may carry some heavy political baggage.''

Nine of the 10 members with quotas reduced production but only Indonesia produced within its new quota. Nigeria actually increased production, from 2.03 MBPD in August to 2.22 MBPD in September, exceeding its new 1.911 MBPD quota by more than 300,000 BPD. The biggest single decrease came from Saudi Arabia, which cut output by 300,000 BPD, although the Kingdom exceeded its new 7.541 MBPD quota by 259,000 BPD. Iran cut output by 100,000 BPD but overproduced its new 3.406 MBPD quota by 244,000 BPD. Venezuelan output dropped by 120,000 BPD but Caracas failed to meet its new 2.7 MBPD quota by 30,000 BPD.

The new ceiling came into effect Sept. 1 after ministers agreed in telephone consultations in late July to reduce quotas by 1M BPD.

At their formal conference in Vienna Sept. 26-27, ministers decided to leave output quotas unchanged and to meet again Nov. 10, although the OPEC basket had already slipped below $22/barrel and several ministers were saying that a new cut might be necessary before November.

In theory, a 500,000 BPD cut should have been triggered automatically Monday when calculations by the group's Vienna secretariat showed that the basket last Friday had spent a tenth day below the price band. Instead, OPEC has opted to hold off on a cut while it assesses the impact on and implications for oil markets of the US-led air strikes on Afghanistan launched Sunday.

So with ministers already talking about new cuts in hopes of boosting the OPEC crude basket, which has now been below the targeted $22-28/bbl price band for 11 days, the new ceiling could shortly be superceded by an even lower one, despite the poor level of compliance. (*)