OPEC Expected to Keep Oil Production Quota Unchanged

OPEC will probably keep its production quota unchanged when it meets on Dec. 11 in Ecuador, ministers from Angola, Venezuela and Libya said. The Organization of Petroleum Exporting Countries considers oil at $80 to $85 a barrel a “comfortable price,” Angola’s Minister of Petroleum Jose Maria Botelho de Vasconcelos said yesterday. Crude traded around $86 a barrel in New York today. Venezuela’s energy minister Rafael Ramirez, who said he prefers a price level of $100 a barrel, told reporters in Doha today that the group will likely maintain its existing output target.

“The current environment is of some stability,” Angola’s Vasconcelos said in an interview. “The sentiment among members is for maintaining the production level.” Libya’s top oil official, Shokri Ghanem, said yesterday in Doha that the organization will seek stricter compliance with the current production target. OPEC, which produces about 40 percent of the world’s oil, hasn’t changed its formal limit since December 2008, when it announced record supply cuts and a quota of 24.845 million barrels a day.

The group’s adherence to that level has faltered as recovering demand and rising prices encourage members to exceed their individual allocations. Compliance among the 11 nations bound by quotas slipped to 51 percent in October, according to data from the group published on Nov. 11. Qatari Energy Minister Abdullah bin Hamad al-Attiyah said today he won’t attend the Dec. 11 gathering in Quito, Ecuador.

Angola’s Vasconcelos said he expects the country’s oil production to increase to 1.9 million barrels a day next year, close to its maximum capacity. Angola pumped an average of 1.73 million barrels a day in November, according to a Bloomberg survey of producers and analysts on Nov. 30. OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Iraq is exempt from the quota system.

Posted courtesy of Bloomberg News

Bloomberg reporter Grant Smith can be reached at gsmith52@bloomberg.net

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Kuwait Worried About OPEC Members' Output Quota Compliance

Kuwait's oil minister Monday said the country is worried about compliance with production quotas by members of the Organization of Petroleum Exporting Countries and will discuss the matter at the group's forthcoming meeting. Sheikh Ahmad Abdullah Al-Sabah also said the 12 member OPEC group is unlikely to change production quotas at the next meeting in Vienna, scheduled for Oct. 14, as current oil prices are "comfortable".

Al-Sabah told reporters he isn't concerned about global crude oil demand, but is worried about OPEC members conforming to production quotas, saying there have been "slippages here and there". "Compliance with their (OPEC) quotas is very important," said the Kuwaiti minister, who is scheduled to meet his Indian counterpart during his three day visit to India.

Al-Sabah's comments come as some member states produce far more than the amount allotted to them under OPEC's production quota system. Higher production by any member could lead to oversupply in the market and hurt global prices. Last week, the oil minister of Angola, an OPEC member, said the country is still producing 1.9 million barrels a day of oil, according to the Angola Press news agency. The southern African nation says its quota is 1.656 million barrels a day, but data from OPEC's general secretariat show Angola's allocation is 1.517 million barrels a day.....Read the entire article.

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Oil Falls as U.S. Growth Revised Lower, OPEC Maintains Quotas

Crude oil fell after the U.S. economy expanded at a slower pace than anticipated in the third quarter and OPEC agreed to maintain production targets. Oil slipped after the Commerce Department said that the gross domestic product grew 2.2 percent from July through September, down from a 2.8 percent gain previously reported. The Organization of Petroleum Exporting Countries will hold quotas at 24.845 million barrels a day. “This was a significant revision,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “This should weigh on prices.”

Crude oil for February delivery dropped 47 cents, or 0.6 percent, to $73.25 a barrel at 10:14 a.m. on the New York Mercantile Exchange. Prices are up 64 percent this year. This was the fourth time this year that OPEC ministers met without revising production figures. Today’s meeting was held in Luanda, Angola. Rising prices have encouraged some OPEC members to renege on their pledge in 2008 to reduce output by 4.2 million barrels a day. Members complied with 58 percent of cuts in November, down from 60 percent the previous month, according to International Energy Agency estimates.....Read the entire article.


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Phil Flynn: Dubious Dubai

Dubai gets a bailout and the risk appetite tries to come back but oil is still being held back by a load of supply. Supply gluts put oil back into a rut on signs that OPEC is cheating more each day. OPEC compliance to production targets fell to just 58% which is the worst score for the cartel since the financial crisis began. The biggest cheaters were Iran and Angola but also, believe it or not, Nigeria's production has come back much faster than expected after the country was plagued with rebel attacks on its infrastructure.

The reasons for the cheating on production quotas within OPEC are varied. There is the greed angle but part of it is there are those who actually want to purchase the oil. Oh sure it is easy to comply with your production targets when there are no buyers for your oil but not so much when you can actually find some buyers.....Read the entire article.


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Phil Flynn: Economic Smack Down

I am trying to figure out who is getting beat up worse, the refiners or the dollar. The smack down on refiners and the dollar send oil on another bullish adventure as commodity price inflation starts to show its adverse economic effects. Refiners for the second week in a row kept refinery runs at historically low levels causing another large drop in gasoline supply which drove RBOB gasoline futures to a seven week high.

The Energy Information Agency reported that refinery use rates rose 0.2 percentage point to 81.1 well below average for this time of year with finished gasoline production at a paltry 8.46 million barrels a day. According to Bloomberg News that was the second week in a row that production fell below 8.5 million barrels and the lowest production was since the week of February 6. The EIA reported that gas supplies fell 2.3 million barrels in the latest week which followed a 5 million barrel plus drop in supply from the week before. Gasoline supply which were almost 7% above the five year average a few weeks ago are now just 3.3% above the five year average. Refiners might as well be on strike as they cannot continue to produce a product that people are buying less of as input prices like crude go up and the dollar weakens. The EIA reported that gasoline demand 3.3 percent from the prior week to an average 8.95 million barrels a day which was the lowest in four weeks.

Add to that another dollar drubbing which helped send oil soaring to another new high. The euro gained strength on speculation that rates in the “zone” could be rising and broke through the $150 level versus the U.S. dollar for the first time in 14 months. Overnight China 8.9% GDP growth was stimulating but is raising questions how long the Chinese government can fuel the growth. Car sales in China were impressive but came on the back of government tax breaks. Fed chairman Ben Bernanke wants the Chinese to spend more but also let the yuan re-adjust so the trade deficit between the US and China can narrow. Early on commodity prices are not that impressed with the Chinese GDP.

Now as oil prices go above $80 OPEC is worried what may happen to demand. Dow Jones is reporting that, “The Organization of Petroleum Exporting Countries will increase its output quota in December, if inventories fall and oil prices and the economy keep recovering", the group's secretary general said Thursday. "If this price continues, if we see the stocks go back to the normal level" and the global economy continues to recover, "I am sure our member countries will take the decision to increase production," Abdalla Salem el-Badri told reporters. He subsequently added another condition to increase output would be "an end to floating storage." OPEC is due to meet next on Dec. 22 in Luanda, Angola. “OPEC is watching what is happening to US refiners and is aware that prices are now at a level that will start a new round of demand destruction and probably will start trying to jawbone the market down. They may be forced to start cheating on production to get prices under control. This would really be a shame because you know how these guys hate to cheat.

The weak dollar is having an impact on everything. How do you protect yourself in a weak dollar environment? Buying precious metals may be one way. If you think that you cannot afford to get in well maybe you are wrong. What if I told you could get into precious metals for as low as $50! Find out how! Just call me at 800-935-6487 or email me. Check me out every day on the Fox Business Network! And if you want a brokerage firm that does things right, you need to be with PFGBest! Whatever you're trading needs we can handle it: cash, grains metals, gold coins, bars and even stocks. If your broker is not doing enough for you call me at 800-935-6487 or email me at pflynn@pfgbest.com. Our platforms are great and the service beyond compare!

Buy December crude at 7427 - stop 7300.
Buy December RBOB at 18000 - stop 17800.
Buy December heating oil at 19500 - stop 19300.
Buy December natural gas at 510 - stop 470.

Phil Flynn @ PFGBEST Research Team
800.462.4691
pflynn@pfgbest.com

Chinese Oil Majors Collect Stake in Angola's Block 32 for $1.3B

Marathon announced that its subsidiary, Marathon International Petroleum Angola Block 32 Limited, has entered into a definitive agreement with CNOOC International Limited (CNOOC), and Sinopec International Petroleum Exploration and Production Corporation (SINOPEC) under which CNOOC and SINOPEC will purchase an undivided 20 percent participating interest in the Production Sharing Contract and Joint Operating Agreement in Block 32 offshore Angola. The transaction has a total value of $1.3 billion, excluding any purchase price adjustments at closing, with an effective date of Jan. 1, 2009.....Complete Story

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