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OPEC Sept 10, 2000 agreement: Oil production increase of 800,000 barrels per day. Mexico may add up to 200,000 barrels per day.
More on OPEC
For current oil and gas analysis and forecasts:
Energy Economics Weekly

To put it all in perspective visit the Oil Price History page.


 
OPEC reached an agreement to increase production by 800,000 barrels per day. Mexico has indicated it may add up to 200,000 barrels by the end of the year. The initial reaction of the futures market was to act as though the agreement never happened. Of course, the increase of quotas is little more than window dressing as most OPEC members do not have the capacity to increase production. 

Oil prices are now firmly in the hands of Saudi Arabia which is the only OPEC members with significant excess production capacity. Saudi Arabia is already producing above the new quota and will likely add more oil to the market. The question is when and how much? 

One of the most interesting items in the OPEC press release was the following: 

"Whilst the Conference expressed its dismay that the governments of the European Union nations fail to recognize the role which their excessive domestic taxation of petroleum products plays in the high pump prices being paid by consumers, and stressed that only 16% of the revenue from a barrel of refined oil in Europe goes to oil exporters, the remaining 84% comprising taxation and the take of refiners and marketers, the Organization welcomes the opening of dialogue with the European Union and other consuming nations, considering a continuous exchange of views on the oil market situation to be in the interests of both producers and consumers."
It would be a tremendous coup for OPEC if Europe did reduce it's taxes on petroleum products. This would have the effect of making petroleum more competitive with other fuels and would also serve to delay the development of alternative technologies. Will the possibility of lower European taxes be sufficient reason for Saudi Arabia to delay or moderate increases? 

The next meeting is scheduled for November 12, 2000.  More information on OPEC.

OPEC Crude Oil Production Quotas1
April 1, 1999 
Quota2
March 28, 2000
Quota2
June 21, 2000
Quota2
Sept 21, 2000
Quota2
Country (thousand b/d) (thousand b/d) (thousand b/d) (thousand b/d)
Algeria
731
 
788
 
811
 
836.6
 
Indonesia
1,187
 
1,280
 
1,317
 
1,358.6
 
Iran
3,359
 
3,6234
 
3,727
 
3,843.8
 
Kuwait
1,836
 
1,980
 
 2,037
 
2,101.0
 
Libya
1,227
 
1,323
 
1,361
 
1,404.2
 
Nigeria
1,885
 
2,033
 
2,091
 
2,156.6
 
Qatar
593
 
640
 
658
 
678.8
 
Saudi Arabia
7,438
 
8,023
 
 8,253
 
8,512.2
 
United Arab Emirates
2,000
 
2,157
 
2,219
 
2,289.4
 
Venezuela
2,720
 
2,845
 
2,926
 
3,018.8
 
OPEC 10
22,976
 
24,692
 
25,400
 
26,200.0
 
Iraq3
NA
 
NA
 
NA
 
NA
 
TOTAL OPEC
NA
 
NA
 
NA
 
NA
 
NA: Not Applicable
1. Crude oil does not include natural gas liquids or lease condensate.
2. Quotas are based on crude oil production.
3 Iraqi oil production is constrained by the United Nations' export limits and is not a part of OPEC agreements
4 Iran was not a part of the March 28, 2000 agreement. 
 

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Copyright 2000 by James L. Williams  
 
James L. Williams
WTRG Economics 
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