BBC NEWS Americas Africa Europe Middle East South Asia Asia Pacific
BBCi NEWS   SPORT   WEATHER   WORLD SERVICE   A-Z INDEX     

BBC News World Edition
 You are in: Business  
News Front Page
Africa
Americas
Asia-Pacific
Europe
Middle East
South Asia
UK
Business
E-Commerce
Economy
Market Data
Entertainment
Science/Nature
Technology
Health
-------------
Talking Point
-------------
Country Profiles
In Depth
-------------
Programmes
-------------
BBC Sport
BBC Weather
SERVICES
-------------
EDITIONS
Thursday, 7 November, 2002, 12:22 GMT
Oil price jitters over quotas
South refinery in Iraq
Oil supplies from Iraq would be disrupted in an attack
Oil prices are hovering around five month lows, following reports that the Organisation of Petroleum Exporting Countries (OPEC) will not impose limits on overproduction.

The price of Brent crude oil has fallen by 25% since its September peak of $31 a barrel, because of overproduction and a weakening sense of alarm over an Iraqi strike.

Reports suggested Opec members have been taking advantage of the high prices by exceeding their production targets, or "quota busting".

But Opec members have denied that there is oversupply and said output targets were unlikely to be cut.

Quota busting

In August, a survey of the number of tanks leaving Opec ports by consultancy Petrologistics, showed that compliance with quotas has fallen to 63%.

That compared to 70% a year before.

At the time, the threat of an imminent attack on Iraq, meaning disrupted oil supplies from the Middle East, kept prices high, creating a so-called "war premium".


Compliance has collapsed and this is bleak for the market

Richard Savage, Bank of America

The Middle East produces a third of the world's crude oil.

But analysts say the prospect of a UN resolution on Iraq, combined with fears that oil stocks are rising, is likely to push prices down further.

"The tide is turning and we're heading for much lower oil prices," said Sarah Emerson of Energy Security Analysis in Boston.

The American Petroleum Institute said this week that US crude oil stocks were up by 2.3m barrels to 291m barrels in the week to 1 November.

This was the fourth week in a row that stocks had increased.

Enforcing the limits

Opec believes the increased stocks will be necessary in the coming winter months for the northern hemisphere, when fuel usage increases.

Ibrahim al-Muhanna, adviser to the Saudi Arabian oil minister Ali Naimi, said:

"There is nothing to worry about right now."

"There is no oversupply in the market. There is production above the ceiling, that's true, but there is no oversupply in the market that could cause a glut."

Opec will meet to discuss its policy on 12 December and compliance to the quotas is likely to be on the agenda.

Time for action?

But analysts have warned that not taking action could be dangerous to oil prices.

"Compliance has collapsed and this is bleak for the market," said Richard Savage, head of European oil research at Bank of America.

For now, the issue of over-production is overshadowing the prospect of an attack on Iraq.

The United Nations is due to vote later this week on a resolution giving Baghdad a final chance to comply with its demands.

Analysis of the oil market, OPEC, and the alternatives

Key stories:

Analysis

Background
See also:

18 Oct 02 | Business
17 Oct 02 | Science/Nature
06 Aug 02 | Business
11 Oct 02 | Business
Internet links:


The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.


E-mail this story to a friend

Links to more Business stories

© BBC ^^ Back to top

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East |
South Asia | UK | Business | Entertainment | Science/Nature |
Technology | Health | Talking Point | Country Profiles | In Depth |
Programmes