Ninety-five is the new 100 percent

March 17, 2009

One reason oil prices are as high – or not lower than they are – depending on your perspective, is OPEC’s unusually high level of discipline. Output targets for the disparate group, whose members range from leading exporter Saudi Arabia to oil minnow Ecuador, have often born a tenuous relationship to reality. This time, they have been met by an estimated 80 percent — and rising. Algerian Energy and Mines Minister Chakib Khelil said OPEC’s discipline could reach 95 percent, but, for “technical reasons”, that would be as good as it would get. Asked about Algeria’s own production, Khelil said it would average 1.229 million barrels per day in March. — “‘So above Algeria’s OPEC target of 1.2?” Asked one of the posse of journalists in attendance. “Yes. It’s 95 percent,” said Khelil and laughed. Well he might. OPEC ministers are generally more relaxed than when they met in December when the oil price was heading towards $30. It has since risen to nearer $50. What might make them even more relaxed would be more output restraint from beyond OPEC. Leading non-OPEC producer Russia keeps turning up at OPEC meetings, but any cooperation with OPEC reductions has been limited to Russia’s involuntary decrease in output that has resulted from underinvestment and natural decline. “Of course we are disappointed,” Khelil said of Russia. “Wouldn’t you be disappointed if you cleaned in front of your house and your neighbours started pouring stuff in front of theirs?”

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