Saudi will resist further cuts at OPEC meet

Tuesday, Mar 10, 2009

Emirates Business reported that Saudi Arabia will strongly resist attempts from its fellow OPEC members to shave off production at the next meet. Mr Richard Savage the head of energy research at Mirabaud Securities said that "Saudi Arabia will not accept to cut its production further if its members do not comply with the quotas that were allocated in the last OPEC meet. Practically, none of the members other than the Saudis have complied with the allocated quotas." Mr Richard said that the while the last cut allocated 24.84 million barrels a day, it is still producing 26.65 million barrels a day. OPEC is expected to arrive at a figure of cutting one million barrels of oil a day under resistance from Saudi Arabia. He said that "The difference is 1.81 million barrels a day. And that's huge. OPEC is expected to cut 1 million barrels a day from its daily output. But then, it's very logical for Saudi Arabia to demand compliance with the cuts that were announced last year." Mr Richard said that "In the early 1980s, Saudi Arabia took the bulk of cuts for four years. It finally decided that it won't cut further until other members also comply. It increased production and the prices crashed." As per IEA data, while Angola is over producing oil by around 15.7%, Iran is over producing by 13.6%. Libya exceeds it allocated production by 12.3%, whereas Venezuela exceeded its allocated production by 9.8%. The most surprising presence on the list of non compliers is Kuwait, which continues to overshoot its production by 12.3%. As per the IEA list for production in January, none of the GCC states other than Saudi Arabia were fully complying with the cuts. Mr Richard said that he expects oil prices to jump to USD 75 a barrel in a year's time. The demand supply fundamentals may not be able to increase the prices on their own. It's the investors and speculators who can increasing the prices.

Source : steelguru