Opec in surprise oil output cut

[ze_dscherman]

Oil producers' cartel Opec has agreed a surprise cut in output, pushing oil prices sharply higher.

Opec energy ministers meeting in Algiers said they had agreed to trim production by 1 million barrels a day from 1 April.

SNIP

However, most analysts had predicted that it would refrain from cutting output for now, as oil prices have already broken above Opec's preferred range of $22-28 a barrel.

SNIP

It is likely to stir fears about the impact of higher oil prices on the world economy, particularly in Europe, where growth remains sluggish.

More: http://news.bbc.co.uk/2/hi/business/3476909.stm

[JeebusH]

1. but Dumbya promised that they would "turn the spigot on" ....

shithead

falling value of the $ probably pushed this move ... as far as Europe is concerned, the Euro's strength against the $ should help soften the impact

[UpInArms]

8. you mean when he said this?

OPEC will increase oil supply out of respect for Bush

Bush said today that he would bring down gasoline prices by creating enough political good will with oil-producing nations that they would increase their supply of crude. “I would work with our friends in OPEC to convince them to open up the spigot, to increase the supply. Use the capital that my administration will earn, with the Kuwaitis or the Saudis, and convince them to open up the spigot.” Implicit in his comments was a criticism of the Clinton administration as failing to take advantage of the good will that the US built with Kuwait and Saudi Arabia during the Persian Gulf war in 1991. Also implicit was that as the son of the president who built the coalition that drove the Iraqis out of Kuwait, Mr. Bush would be able to establish ties on a personal level that would persuade oil-producing nations that they owed the US something in return.
Source: Katherine Q. Seelye, NY Times Jun 28, 2000

9. Time to invade Venezuela

Wonder if it will suddenly start showing up in the news again?

[aneerkoinos]

28. OPEC to US: blow yourself

From the opening address http://www.nytimes.com/2004/02/10/business/10OPEC-TEXT.html

"Crude oil prices have remained high since our last meeting on 4 December, and there have been calls for OPEC to raise its output ceiling to help bring prices down.

OPEC is sensitive to such calls, especially when they come from other responsible members of the global energy community. Indeed, our own day-to-day monitoring of oil market movements itself picks up the same signals. We take these situations very seriously, because we know that, if oil prices pass certain threshold levels — either upper or lower levels — they can have an adverse impact in a broader economic and political realm, which may ultimately rebound on the petroleum industry.

Why, therefore, have we not taken action on price levels which have consistently exceeded the top end of our price band of US $22–28 a barrel for OPEC’s Reference Basket since our December meeting?

The principal reason is our judgement that the oil market is already well-supplied with crude. However, the benefits of this are being mitigated by low crude oil inventory levels in the USA, excessive speculation and continued geopolitical tensions.

In particular, prices are being affected by US crude oil stocks falling beneath the perceived lower minimum operating levels in a regime of just-in-time inventory policies and the high level of non-commercial speculation. These destabilising forces are, to a great extent, treatable, but they are beyond the reach of OPEC."

Emphasis mine. The way I read this, OPEC is saying FU to US with extremely little diplomatic veiling.

[camero]

29. They have a point about JIT.

This keeps inventories low and creates a shortage when an unexpected emergency arises. Notice the price spikes in 2000 were not caused by OPEC per se but from shortages at the pump.

[54anickel]

41. He-he. Sounds like the mafia trying to call in old favors, doesn't he?n/t

[historian]

51. another illusion shattered

Oh no! Please dont tell me that the house of Saudi will help Slime's re election bids by appearing to kow tow before him and inrease the production of oil just in time for november! I am shocked that such things should happen.

[loudsue]

2. This is big...bigger than I wish it was...

I can see oil & gas prices going through the roof by the end of 2004, and it's going to hurt the U.S. economy more than many think.

I'm wondering what "hidden agenda" the OPEC countries have in their bag of tricks.

If this goes on, it will certainly give the bush cabal more reason to go for "regime change" in all these OPEC "terrist" countries.

We've just begun to fight bush's wars.

:kick:

[Mithras61]

7. OPEC's "hidden agenda"

I suspect that OPEC's "hidden agenda" is to get off the dollar standard and onto a "more stable" currency (like the Euro). It has been speculated that one of the reasons for targetting Iraq ahead of so many other more likely terrorist sponsoring nations was that Iraq had started selling oil in Euros instead of US Dollars. If this happens world wide, we may be truely and royally screwed, because this would significantly decrease the attractiveness of the USD for international trade, and countries would reduce/eliminate their stockpiles, which means that the "check" that the USD overseas represents would be hitting the bank with decreasing funds to support it.

[Eurobabe]

13. we heard something on CNBC Nightly Biz Report

to this effect. That sooner rather than later that OPEC will ditch the dollar in favor of the Euro.

[0007]

49. Ah, this is just what Cheney ordered!

[Caution]

3. call me crazy

but this is a strange move by opec right now. They prefer a specific price range because prices outside of that range have a wide impact on global economics. cutting production will harm the US economy as oil prices are already too high. Sounds like the Oil Producing Countries may be trying to knock Bush out of the whitehouse as well. (not surprising considering they must be wondering just who the religious fanatic is going to attack next).

:tinfoilhat:

(and if you look at my previous posts i'm such a conspiracy theory skepticist)

[htuttle]

5. They are just trying to stay even

With the drop in the dollar, and the likely trend for it to continue to drop, OPEC has been losing a lot of buying power (since oil is priced in dollars).

While the price of a barrel of oil has risen in dollars over the last two years, in other currencies, such as the Euro, it has dropped quite a bit (at least on the barrel -- not sure about at the pump).

The more the dollar drops, the higher OPEC nations will need to price their oil just to keep the same buying power -- assuming they continue to sell it for dollars.

[kysrsoze]

39. I'm sure part of the reason is b/c they hate the current administration

I've seen hints of lots of policy decisions in the ME designed to make the administration look bad and get them out of office. It's to their benefit to get him out, and almost nothing can wreak havoc on our economy like low supply/high prices for oil. These people are not stupid.

[Jacobin]

6. It's the decling value of the dollar

They HAVEN'T raised prices. They are charging in euro equivalents and since the dollar has declined 25% or so, prices are about what they were a year ago (at least in terms of what the OPEC countries receive in devalued dollars)

Another price of an economy with giant deficits

[Caution]

10. ahh thanks

I feel unfocomfortable wearing a :tinfoilhat:

[Jacobin]

27. Ya don't need a tinfoil hat to google up exchange rates

my friend. Dollars held by Saudis have lost a lot of value:




See? You don't even need a crystal ball, voodoo dolls or anything.
:-)

[Merlin]

17. That may be true. But it's still a slam against the US economy and Bush.

You and Tuttle are right, and I appreciate your insight. But this move must have been considered in the context of the effect it will have on the US elections. The Arabs have stood still in the face of effective price declines for long periods in the past.

The timing here, imo, is significant. They want Bush out. Who could possibly blame them?

My tinfoil hat is in place.

[Jazzgirl]

47. Caution, you are echoing my thoughts.

I think the OPEC nations probably feel shrub's dangerous and figure this is a good way to get American's pissed off enough to really want him out of the WH. Big business ain't gonna like it if OPEC shifts to the Euro. They'll turn on him like the traitor he is.

[central scrutinizer]

4. not good for *

There are only two things that can rouse many of the proles out of their stupor: higher gas prices or higher cable TV rates. They will be looking for somebody to blame.

[saigon68]

16. The Pukes will tell them to blame Clinton

On the drive in this A.M. ---the local radio representative of the Hitler Youth and Clear Channel was ragging on the fact, that the CHIMPANZEE could fly a plane and "Clinthong" as he called him was a draft dodger--


Disgusting----

[maxsolomon]

11. converting my TDI to peanut oil

that is, if i could afford a TDI.

[bigtime]

12. maybe OPEC wants junior out?

?

[Merlin]

14. That's my take, too. Yesterday I paid $2.93/Gallon near Wilmington, DE

That's quite a spike over 3 months earlier, and at about the levels of the invasion anxiety.

One thought is that the Bushies want prices up now, so they can bring them tumbling in the summer as a real jolt to the economy. But that would be too clever by half for them, and way too risky.

I think you've got the better interpretation, and this move by the Arabs supports it. High oil prices will cut any recovery off at its knees.

I'm willing to pay substantially more at the pump if it leads to the disposal of this miserable bum in the WH.

[Fla_Dem]

18. $2.93 a gallon

For What ?

[Bandit]

24. Are you sure you don't mean $1.93 a gallon?

I live in alaska and gas here is HIGH but still no where near $2.93 a gallon. I am incredulous.

[Merlin]

58. DAMN! I MEANT TO SAY $1.93. SORRY!

Caught this, and your note, too late to edit my post. Thanks.

[kysrsoze]

40. Agreed. This is good for us in the long run b/c....

it will force the need for more fuel-efficient cars and alternative energy sources. Thanks, OPEC!

[BigDaddyLove]

15. What REALLY sucks about it is that now Bush and Friends.......

can say "see, we REALLY need to drill in the Arctic now, it's the only way to become less dependent on foreign oil"....and people will buy it.


If I didn't know better, I'd say that OPEC and Bush are working hand in hand to get yet another of Bush's agenda's enacted.

[peterh]

19. Your clairvoyance is showing today…

Speaking after a congressional committee hearing on the DOE's fiscal 2005
budget, Kyle McSlarrow, the deputy secretary of energy, said that "we always
tell our OPEC colleagues that when they take decisions, they should take the
U.S. economy into consideration."
McSlarrow's comments echo those of Secretary of Energy Spencer Abraham, who
has said that producing nations shouldn't take any steps that crimp world
economic growth.

McSlarrow refused to discuss what impact OPEC's production cut would have on
U.S. gasoline prices during the second quarter, part of the key summer driving
season.
McSlarrow said volatile energy prices are one reason the U.S. needs to pass a
comprehensive energy bill.
Senate Energy and Natural Resources Committee staff are expected to brief
reporters this afternoon on a slimmed-down version of the energy bill.

[stepnw1f]

20. "Peak Oil", maybe?

[aneerkoinos]

32. I think it is.

One big OPEC guy blurted few weaks ago that with that 1,5mbd production over quota, OPEC is producing at full capacity and could not increase real production even if willing.

Now they say wanting to be serious and first cut overproduction and then the total quota. Must feel extremely uncomfortable producing at full capacity, which gives no leveradge needed for market control, no power for the Cartel, whose raison d'etre is controlling the market. IMO that is the real reason OPEC is cutting production.

So with the Peak Oil happening right now, OPEC is the only one acting in a responsible way (for selfish reasons of course), keeping the prices high and so softening at least a wee bit the big blow when the truth is publicly realized in a few years.

[jpak]

21. Oil is a globally traded commodity

Bush and friends will never sell Alaskan crude at below market prices.

Oil production from ANWR will be insignificant relative to global production - it won't affect global crude prices.

Alaskan oil is not and will not ever be Cheap Oil - no matter how the Bushies spin it.

[BigDaddyLove]

22. Totally agree........

Facts have never stopped Bush and friends from plowing ahead with any of their destructive policies....this will be no different.

All I'm saying is that this will be used by the right to push for something they've been wanting to reward their donors with for a long, long time.

[peterh]

23. I wish more people understood that little fact….

The market “is” what the market “is”…..and domestic production will be priced at a “quality” premium or discount to our benchmark crude….West Texas Intermediate (WTI) which is currently up $.97 per bbl @ 33.90…..

If well-head breakeven levels, say for ANS (Alaskan North Slope), are around $13.50 per bbl and in today’s market that bbl might command $32.00 per bbl (ANS avg 1 to 2 bucks discount to WTI)…..believe me folks…like I have to tell ya….that $18.50 profit margin isn’t going anywhere but to the bottom line.

Using BP/Arco as an example….retail gas prices will be posted per market…32 bucks or above…not somewhere between 13.50 and 32…..

[NickB79]

33. They'll conveniently leave out how

It will take at least a decade to set up the equipment and infrastructure to drill in ANWR and pump the oil to the lower 48. If we keep guzzling gas like we are now, oil from ANWR will be too valuable to waste in cars and trucks 10 yrs from now. Medicines, jet fuel, fertilizers and plastics have higher priority.

[hatrack]

25. Also, don't forget China

These two articles give an interesting picture of exploding demand there.

EDIT

"China, whose hydrocarbon needs are going to grow 15 per cent per year in the coming years, is becoming a privileged partner," the dealer said.

Last year China consumed 5.46m barrels per day to fuel its rocketing economic growth of 9.1 per cent, making the country the second-biggest oil consumer in the world after the United States with 20m bpd and ahead of Japan at 5.43m bpd, recent estimates by the Paris-based International Energy Agency (IEA) show. According to Chinese customs data, crude imports jumped by 31pc to 91m tonnes.

Although China's oil demand lags far behind that of the United States, analysts are becoming concerned about its impact on the market. "Growth in Chinese demand risks creating tensions on the market; Opec is already producing at full capacity", said Morgan Stanley analyst Irene Himona."

EDIT

http://www.gulf-daily-news.com/Articles.asp?Article=73757&Sn=BUSI

BEIJING, China (Reuters) -- "China's crude oil imports, fueled by a booming economy, rose nearly 80 percent year on year to 9.3 million tonnes in December. Huge infrastructure projects, a bustling transport sector, a family car boom and a power supply crunch are behind the massive rise, according to the Chinese government agency, the General Administration of Customs

The rise, the second highest in 2003 after September's 9.8 million tonnes, pushed China's crude imports to record levels and set the country on course to become second only to the United States in the league of world oil consumers.

Crude oil imports for all of 2003 reached 91.1 million tonnes, up 31.2 percent, the agency said.

Crude imports were nearly 10 percent more than the 83 million tonnes Chinese oil officials had forecast in October."

EDIT

http://edition.cnn.com/2004/BUSINESS/01/18/China.oil.reut/

[legin]

45. Something to think about (or avoid thinking about)

China: pop. 1,286,975,468 (July 2003 est), oil consumed per day 5.46m barrels, barels per day per person is 0.00424.

u.s.: pop. 290,342,554 (July 2003 est.), oil consumed per day 20m barrels, barels per day per person is 0.0689.

If China consumed oil at the same rate as the u.s., China would require imports of 88.7m barrels per day (current world production is about 75m barrels per day).

(hopefully I got my sums right. I think I did)

used:
http://www.cia.gov/cia/publications/factbook/geos/us.html

[htuttle]

46. That's the other half of the oil depletion calculation

Do you think anyone should break it to the rest of the developing world that they will never be able to have a lifestyle like Americans have? (at least not without non-petroleum energy sources)

Perhaps they've already figured that out in some places...

[legin]

48. I used to know a quick and easy method

for roughly working out how quickly say a population would double at a certain percentage increase per year (a third world development economics book).

It was some number divided by the percentage growth (it saved doing compound interest).

I've done some rough calculations and I think it is 75/percentage growth.

So say China has 10% growth per year (15% in above article but playing safe), 75/10 = 7.5, so China's consumption of oil could double every 7.5 years.

So by 2011 consumes about 10m a day, 2018 20m per day, 2026 40m.

***Full possible dodgy maths Alert (with sirens going)***

[muriel_volestrangler]

50. Your rough figure is right

Completely accurate method, if you have a calculator with logs available (eg the 'Scientific' view of the Windows calculator):
log(2)/log(1+percent growth/100)

eg for 7% growth
log(2)/log(1.07) = 10.2 years

for 10%
log(2)/log(1.10) = 7.3 years

[legin]

52. thnx muriel_volestrangler :-) n/t

[Jackpine Radical]

53. Can't you approximate this as an instance of the Rule of 72?

Like calculating how long it takes to double an amount of money at a given rate of compound interest?

[legin]

55. Works for me

:-)

'the Rule of 72' has a poetical look and sound to it, makes it easy for me to remember.

The 72 figure seems to work better for the single diget percentage figures i think I have just been calculating.

[camero]

26. Need some edumacation here

It was my understanding that the time from when they make a production cut to when the fuel actually gets delivered to the pump was about 6 months.

Since the oil industry is one of the major donors of the repubs, wouldn't this price spike be just in time for the elections? It gives Bush some extra campaign dough for the home stretch.

[Fovea]

30. This is not a surprise to me

I have been telling you all along that 2004 would see a dramatic spike in oil prices. Gods how I love being right, seeing as how I ride a bicycle most of the year.

We have officially entered peak oil, and the producing states are fundimentally re-aligning price structure based on increasing scarcity of easily produced petroleum.


Concider that 3 hours before this story broke, Manilla Bulletin reported
a softening of oil prices partially reflecting demands by consumer groups.

http://www.mb.com.ph/BSNS200402111913.html
<snip of lead>
International oil prices have started to take soften but local oil companies have emphasized that they cannot heed calls for a price rollback yet; considering the magnitude of their under recoveries that accrued in the past four months.
</snip>


My prediction is $3 Gal gas by June. And that Benchmark Crude will top
$50/bbl by the end of the year, after Bush invades S.A. to secure democracy which will cost about 38/bbl when he goes in.

Why?
Because the middle east will literally be on fire.
The corresponding price shock will nudge oil prices into a new quanta,
perminently. Russia and the rest of the OPEC nations would forgive us, if it meant stabilization at < $40/bbl. Europe will not.

George does not need to be re-elected to set the BFEE up forever.

To those who call me a nut ... wave when you ride by.

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[NickB79]

34. How much of an effect would opening the Strategic Oil Reserves have?

Some have speculated that, if gas prices really spike hardcore before the election, Bush will be forced to authorize the release of oil from the Strategic Oil Reserves. How much do we currently have stored, and how much of an effect might that have on the price of gasoline and fuel oil? I know it would only last a few months, making it is no real solution, and it leaves us without oil reserves in case of a true national emergency, but there are too many idiots out there that would see this as a sign Bush is bringing back $1/gal. gas and vote for him again.

[htuttle]

36. That would be an incredibly stupid move, but he might do it anyway

The Strategic Oil Reserve is theoretically supposed to be for the purpose of fueling critical military needs, right?

Given that we are embroiled in military action in the major oil producing region, wouldn't releasing the strategic reserve for political purposes be....well...nearly as bad as getting us in a war for political reasons on the basis of a lie?

[Mithras61]

37. I seem to recall that the SOR have been depleted

and not replenished because of the unexpectedly harsh winter last year and the higher than expected prices for crude last summer, so there might not be much left to release...

[RamboLiberal]

42. I think Bushie's been replenshing the SOR all winter

That was listed as one reason why prices were higher this winter. Also the harsh winter much of the U.S. experienced.

But for the life of me I can't figure out what Bushie's good buddies in OPEC are doing. I would've figured between them and the oil execs they'd be lowering prices artificially to keep dimbulb in office.

Since election day 2000 I feel like I've been living in the twilight zone.

[bobbyboucher]

57. With stolen Iraqi oil.

Who's counting the oil leaving Iraq? Halliburton? Are you to tell me that no oil has left Iraq since the war? If those pipelines are empty they wouldn't explode and burn out of control.

Gimme a break.

[aneerkoinos]

38. !!! getting closer

but still don't realize the evil genious of our plan.

If using SOR is what is needed to steal the election with remotely credible numbers, then so be it, it will make the next step even easier. Thanks for the tip, btw! :)

The real plan is to run US economy out of fuel into real catastrophy, then tell the truth about Peak Oil and then to declare marshal law to keep rioters at bay - really the only responsible thing to do, everyone who matters will then agree - and blame OPEC, France, China, Chavez etc. for smelling bad or what ever. Hopefully after the reselection of our puppet dictator, because that will make it easier, but if necessary, before the election.


All The Best,
the evil PNACster

BUHAHAHAA :D

[SoCalDem]

35. "Surprise!!".... $3.00 a gallon gas..

:(

[54anickel]

43. Hmmm, Economic Terrorism?

Will that be the Bushco spin?
:tinfoilhat:
They hate us for our freedom, no wait, they hate us for our wealth and power, no wait, they hate us for our SUVs.

Yoh, Shrub. They hate us for our Idiot Son of an Asshole pResident!

[Solon]

44. No Doubt that will be the spin.

No tinfoil needed to assume that. However, OPEC's move is not to keep prices artificially high, but is simply a forecast of things to come. They can not keep up with demand, I would say that Oil will shoot up to 40 dollars a barrel by the end of the year, if not more. Expect shortages in certain areas of the world soon as well.

[Lorien]

54. Bush* IS an Economic Terrorist!

just take a gander at the other headlines in LBN!

[pacifictiger]

56. I think the Arabs are a pretty craft lot

and way more astute than most people give them credit for. Im sure they see bush for the arrogant fool that he is and would not be sorry at all to see them all go. They don't want US world domination a-la PNAC style any more than the rest of us do. They want to keep their own power base. I'm sure also that they must be aware of the peak oil factor and perhaps they are looking at releasing oil to the rest of the world at a slower rate - they certainly don't need the money right now, better to keep it in those underground well vaults. It is their only bargaining leverage on the militarily superior west.