As expected, Organization of Petroleum Exporting Countries (OPEC) energy ministers voted in Vienna on June 26 to maintain their production quota total at 25.033 million b/d.
Unexpectedly, OPEC announced that members reiterated a firm commitment to the quota arrangement and "made an undertaking to restrain output to their agreed level of allocation."
Oil traders initially showed little belief in the ability of some OPEC members to restrain output, driving Brent crude oil for August delivery down 37¢/bbl immediately afterwards.
Yet while Brent crude closed at $17.85/bbl that day, by close of business in London on June 30 the benchmark blend had rallied to $18.51/bbl and on July 1 closed at $18.80/bbl. The new OPEC agreement runs from July 1 to yearend 1997.
Stability sought
OPEC said the rollover reflects a wish to ensure stability in crude oil markets and thus maintain members' revenues at acceptable levels.
The Saudi Arabian minister was thought to have twisted a few arms behind the scenes.
Middle East Economic Survey (MEES) reported that OPEC's quota violators, of which the most blatant is Venezuela, appear to have taken the decision to reduce output if Venezuela does.
Venezuela has recently been producing more than 3.2 million b/d of oil, way beyond its quota of 2.359 million b/d (OGJ, June 23, 1997, p. 24). Venezuela's government has also promised to raise output still further.
"The oil industry can be full of surprises," said MEES, "but frankly speaking it is at present hard to find a single oilman who will admit to believing that Venezuela will for a moment consider changing its present policy of volume maximization."
The next meeting of OPEC energy ministers will take place in Jakarta beginning Nov. 26.
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