The OPEC, led by Saudi Arabia, has sharply increased oil production over the last month to damp high oil prices, which threaten the weak economic recovery and could spike if the US attacks Iraq, industry and Middle East experts said Thursday.
OPEC, which accounts for about one-third of the world's oil supply, has reduced exports several times this year, at least on paper, to 21.7 million barrels a day. Oil prices have fallen recently, but for most of the year have remained fairly high, averaging about US$25 a barrel. OPEC members have been cashing in by producing far above their official quotas.
A recent survey of OPEC and oil industry officials by Platts, an industry newsletter, indicated that OPEC's 10 voting members produced 24.48 million barrels a day in October, an increase of 520,000 barrels a day from September. Iraq, which belongs to OPEC but whose production quotas are set under UN sanctions, also increased its output, by about 500,000 barrels a day. Taken together, more than 1 million additional barrels a day of oil flowed into global markets at a time when demand is still fairly anemic.
The price of crude oil for December delivery closed at US$25.29 a barrel on the New York Mercantile Exchange Thursday, up US$0.10 from the day before. Over the last month, the price of oil for December delivery has declined US$4.68 a barrel, or 15.6 percent.
The most obvious explanation for OPEC's barely veiled cheating is that the market has been able to absorb it, keeping prices high.
"They were making quite a bit of money without weakening the price until recently," said Leonidas P. Drollas, chief economist for the Center for Global Energy Studies, a London consulting and research firm. "They have been overproducing all year, and they just got greedier."
Many oil traders expect prices to fall even more in the near future because they think the rampant overproduction at OPEC signals the end of the cohesion that permitted the group to manage oil markets over the last three years and keep prices between US$20 and US$30 a barrel, said George Beranek, manager of market analysis for the Petroleum Finance Co, a Washington consulting firm.
But Beranek and other industry analysts said they thought that OPEC's overproduction was, in fact, an example of fairly effective, hands-on market management. The evidence, the analysts said, is that the members have maintained their percentage of output, as established by the official quotas, even as they overproduced, indicating that the increase was coordinated rather than ad hoc.
Most countries are producing about 10 percent more than their quotas, industry experts said. Saudi Arabia, the world's largest oil producer, has increased its output the greatest in absolute terms, by more than 800,000 barrels a day above its quota of 7.053 million barrels. The move may be consistent with the Saudis' tradition of keeping oil markets well supplied whenever conflict has loomed in the Middle East, said Edward L. Morse, executive adviser at the Hess Energy Trading Co.
OPEC recognized that inventories of oil in many consuming countries were ebbing toward the low end of normal.
Add to this fears of a war in Iraq touching off disruptions in the supply of oil from the Middle East, and oil prices rose in mid-September to about US$30 a barrel, a level most of OPEC considered uncomfortably high, industry experts said.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
RSS