The Organization of Petroleum Exporting Countries officially closed its ministerial meeting in Vienna on Sept. 24 and, as expected, confirmed it would adhere to current production targets.
The OPEC members-with the exception of Iraq, which has its production governed by the oil-for-aid agreement with the United Nations-maintained their combined production target at 22.976 million b/d (OGJ, Sept. 27, 1999, Newsletter).
This level was agreed in March following an agreement with non-OPEC producers Mexico, Russia, Norway, and Oman to cut output in a bid to boost oil prices, which had only just recovered from rock bottom (OGJ, Mar. 29, 1999, p. 18).
Crude oil markets reacted positively to OPEC's determination to keep production in check. Brent crude for November delivery closed at $23/bbl in London trading before the meeting on Sept. 21 and had surged to $24.14/bbl by the end of Sept. 27.
Energy futures prices soared on the New York Mercantile Exchange after the OPEC meeting closed, with NYMEX crude for November delivery promptly gaining 75¢/bbl to settle at $24.87/bbl, while the December contract was hiked 76¢/bbl to close at $24.37/bbl.
OPEC News Agency (OPECNA) attributed the price boost to the fact that analysts had increasingly predicted higher and higher prices in the wake of globally tightening crude supplies. The agency cited a supportive report from the American Petroleum Institute that disclosed a hike in US gasoline demand to 8.9 million b/d during the previous week.
Traders seemed confident that the approaching winter heating season would usher in even higher prices, said OPECNA. Brokers were said to have been encouraged by comments from OPEC and non-OPEC ministers attending the meeting, who claimed they had adhered closely to output ceilings "because they had all learned the lessons of production ill-discipline-plummeting prices."
OPEC oil revenues
Meanwhile, officials of London's Centre for Global Energy Studies were quoted by the Al Hayat daily newspaper as saying that OPEC's oil revenue is poised to rise by $25 billion this year on the back of the recent increase in crude prices.
One third of that increase would go to Saudi Arabia, said the CGES officials, while revenues for OPEC members, excluding Iraq, would reach $120.7 billion this year compared with $95.7 billion in 1998.
Al Hayat said the oil price boost would double Kuwait's oil revenue for the country's current fiscal year, which began in June, enabling the government to turn the state's anticipated budget deficit into a surplus.
The newspaper quoted leading Kuwaiti economist Jassem al Saadoun as saying that the country's current budget estimates were based on a forecast of $10/bbl for crude oil, but prices had already surpassed the $20/bbl level and could remain there for the entire fiscal year.
"There are indications," said Al Saadoun, "that oil prices will remain above $20/bbl in the fourth quarter and into the next months because of OPEC's adherence to the agreed production cuts."
Meanwhile, the argument over who should become the new secretary general of OPEC (Saudi Arabia, Iran, and Algeria all put forward candidates) was unresolved when the Vienna meeting closed.
Abdullah bin Hamad al Attiyah, Qatar's minister of energy and industry, reportedly claimed that OPEC will reach consensus on a new secretary general, but that the issue would not affect the unity of the organization.
OPEC ministers agreed to defer the appointment of a new secretary general to replace Rilwanu Lukman, who has been appointed advisor on energy and petroleum to the president of Nigeria.
There would be further consultations between OPEC ministers on the issue, said OPECNA; meanwhile, Lukman has agreed to stay on in the position to allow time for a successor to be found.
