OPEC can’t agree to raise production quotas but oil production will climb anyway

Maybe next time.

OPEC ministers meeting in Vienna today were unable to reach agreement on changing production quotas last set in December 2008. That December quota amounted to a production cut to support oil prices as demand slumped after the global economic crisis.

Six members voted against increasing quotas while Saudi Arabia, and three other Gulf Cooperation Council countries voted to increase production by 1.5 million barrels a day.

The “no decision” left “official” production at 24.85 million barrels a day. “Unofficially,” the 11 OPEC members bound by the quotas violated them to pump 26.15 million barrels a day in April. Since then the Saudis have increased production by another 200,000 barrels a day in May and are on track to add another 200,000 to 300,000 barrels a day in June as part of that country’s decision to lower global oil prices.

I expect cheating and production beyond the quotas to continue—Saudi Arabia, Kuwait and the United Arab Emirates will increase production in all likelihood–but the decision not to raise quotas will push oil prices higher. Raising the quotas would have been a go ahead for some members to continue to cheat, but from new higher quota levels. Read more

Oil to stay stuck at $70-$80 a barrel in 2010

So who ya’ gonna’ believe on oil prices in 2010?

The economists at the International Energy Agency predict that oil demand will pick up sharply in 2010, rising about 1.5 million barrels a day from 2009 levels.

Big oil traders, who handle about 15% of the world’s oil output, are significantly less optimistic, according to the Financial Times. They say, the newspaper reports, that demand will pick up more slowly than expected in the first half of 2010. These companies say the increase will be more on the order of 1 million barrels a day.

And that won’t be enough to move oil prices currently stuck in a trading range of $70 to $80 a barrel.

The problem, as the oil traders see it, is that although demand from China and India will increase strongly, growth in demand from developed economies will be anemic.

OPEC (the Organization of Petroleum Exporting Countries) looks like it’s going with the traders. Read more