Word: bbl
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Dates: during 1980-1989
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Before delegates from the 13 OPEC members had even left London, many energy experts were saying that the continuing oil glut would force prices down further. To keep that from happening, the members agreed to individual production quotas designed to limit their overall output this year to 17.5 million bbl. per day. That is 1.3 million bbl. less than the average rate for 1982, but 3.5 million bbl. more than the current rate. Said a hopeful Sheik Ahmed Zaki Yamani, Saudi Arabia's Oil Minister: "I have a strong feeling that this [agreement] will work out and that OPEC...
Maybe so. But at the moment OPEC is clinging to the rear bumper, and market forces are dragging the group down the road. Because of slumping demand for oil, OPEC'S production has plummeted from 30.6 million bbl. per day in 1979 to a current rate of 14 million. Unless demand snaps back sharply, the target ceiling of 17.5 million bbl. per day will be irrelevant. Even after last week's reduction in the bench-mark price, many oil buyers still balked. Said Barry Good, senior oil industry analyst with the Morgan Stanley investment firm: "I have...
Whether or not prices keep tumbling may depend on the actions of OPEC'S oil-producing competitors. Mexico, which last week lowered the charge for its Isthmus crude to $29 per bbl., is staying in line with OPEC prices. Egypt, however, lowered the price of its best crude from $29 to $27.25, and the Soviet Union has been aggressively discounting its oil to raise foreign exchange (see box). At the same time, Britain is under pressure from customers to undercut OPEC by dropping the $30.50 per bbl. price on premium-quality North...
OPEC is counting on a surge in demand to firm up prices. For several weeks, oil refiners have been shunning OPEC crude and drawing down their inventories at a particularly rapid clip-some 4 million to 5 million bbl. per day-in anticipation of price cuts. At some point, the refiners will have to start rebuilding their stocks. In addition, the emerging economic recovery in the industrial nations could spur oil consumption and send prices back...
Even if demand bounces up to OPEC's target level of 17.5 million bbl. per day, the group still faces the danger of widespread cheating on quotas. Similar production agreements in the past have crumbled as several countries, including Iran, Nigeria and Venezuela, offered under-the-table price discounts to raise sales. These nations are buffeted by economic and financial difficulties that will make more cheating almost irresistible...