Opec may have problems on its hands as compliance levels fall – right when crude oil prices are falling, too.
Compliance levels with the combined 4.2m b/d reduction agreed by the cartel late last year reached as high as 85 per cent – an unusually high level – earlier this year. It began to decline again, as some members took advantage of higher prices. Oil prices of course continued their rise for much of the past few months. But with the decline of the past week, those falling compliance levels might become more of a problem.
From Platts’ The Barrel:
OPEC’s leakage coincided with the broadly upward trend in oil prices that began in mid-February. OPEC’s crude basket stood at $35.58/barrel at the end of last year. By June 11 this year, it had risen to $70.87/b, the highest level so far in 2009.
But prices have since fallen back and the basket stood at $60.58/b on July 9, representing a drop of more than $10/b over the past four weeks. Which begs the question: Will lower prices — assuming they last — spark a renewed effort within OPEC to rein in production?
The cartel is not scheduled to meet again until September, and new decisions take a while to take hold in any case. It could be an interesting couple of months for some members.
Opec: Is the cartel’s discipline crumbling? (FT Energy Source, 14/05/09)
Despite Opec’s compliance push, laggards are holding firm (FT Energy Source, 13/03/09)