To recap: Last December, OPEC said it was removing 4.2 million b/d of oversupply from world oil markets by combining two earlier output cuts--a supply reduction of 500,000 b/d that was to be achieved through stricter compliance with official quotas and a 1.5 million b/d cut from official levels--with a new net cut of 2.2 million b/d. Using a baseline of 29.045 million b/d -- estimated September 2008 production -- for the combined cut, OPEC set a new production of 24.845 million b/d.
Volumes already had been coming down since late summer and the drop accelerated between December and January, when Platts estimates showed supply from the 11 members bound by quotas -- Iraq doesn't have one -- falling by 970,000 b/d. Volumes dropped again in February and March but then started moving up in April.
The latest monthly Platts survey of OPEC and oil industry officials and analysts estimates OPEC-11 output at 26.04 million b/d, 430,000 b/d more than the March figure and nearly 1.2 million b/d more than their agreed target.
OPEC's leakage coincided with the broadly upward trend in oil prices that began in mid-February. OPEC's crude basket stood at $35.58/barrel at the end of last year. By June 11 this year, it had risen to $70.87/b, the highest level so far in 2009.
But prices have since fallen back and the basket stood at $60.58/b on July 9, representing a drop of more than $10/b over the past four weeks. Which begs the question: Will lower prices -- assuming they last -- spark a renewed effort within OPEC to rein in production?
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