ASPO-USA by Gail Tverberg: The results of OPEC’s latest meeting to set oil production quotas were announced last week. Instead of production targets for individual countries, a group production ceiling of 30 million barrels a day was set. This amount is a bit less than OPEC produced in November 2011 (actual 30.367 mbd), according to its reckoning, and less than it would have produced most of 2011, if Libyan production had stayed on line, based on the amounts shown in its November Oil Market Report.
A recent history of oil production from the November Oil Market Report, both for OPEC and in total, is shown in Figure 1.
Figure 1. Recent oil production for World and for OPEC, according to OPEC November Oil Market Report.
According to a Platts report of the meeting, Venezuelan Oil Minister Rafael Ramirez told reporters, “We are going to reduce the level of production of each country to make space for Libya.” That is not what people want to hear-Brent oil price is still over $100 barrel, even with what seems to be record production for both the world and OPEC, based on Figure 1.
The same Platts report also says, “OPEC on Tuesday said it expected demand for OPEC crude next year to average 30.09 million b/d.” Thus, the new production cap is slightly less than what OPEC sees as demand going forward.
It should be noted that the new limit includes Iraq in addition to the “regular” OPEC countries. Thus, the agreement says that if Iraq increases its production, other OPEC countries will reduce their production to keep total production to 30 million barrels a day.
All of this comes shortly after Saudi Arabia announced that it has halted plans to increase capacity to 15 million barrels a day by 2020. I wrote about this in a recent post. Saudi Arabia claims to have 12 million barrels a day in capacity now, but there is little evidence that it can actually produce this amount of oil. Saudi Arabia recently boasted that it would increase oil production above 10 million barrels a day, to help offset the drop in Libyan oil production, but amounts reported by the OPEC Oil Market Report and the EIA report of monthly oil production are still under this amount. The highest Saudi oil production reported by the EIA is 9.94 million barrels a day in August 2011.
There would seem to be several reasons for applying an overall cap to OPEC production...
