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Oil’s not well: are we reaching the breaking point in the sector?
Something’s gotta give during this week’s OPEC meeting as GCC favours increased production even as global demand falters. Could this stalemate be causing the absence of petrol in the UAE?
June 7, 2011 3:19 by Precious de Leon
The outcome of the latest OPEC (Organization of the Petroleum Exporting Countries) cartel meeting this Wednesday is still unannounced but there seems to be a stalemate between the GCC pushing for a higher increase in oil supplies and Iran’s stance of staying to the current output.
And Kipp wonders if this has anything to do with head scratcher that is the absence of petrol in oil-producing UAE.
Rather than succumbing to GCC requests to allow for increased output, delegates say OPEC is more likely to merely close the gap between actual supplies and the lower figure that is OPEC’s official production target.
The gap currently stands at about 1.4 million barrels a day — the difference between OPEC’s latest estimate of its output, 26.2 million bpd, and the 24.84 million bpd formal target set in December 2008. (check out Reuters graph below illustrating these figures)
Worried that crude prices near $115 a barrel are undermining economic growth, Gulf producers including Kuwait and the UAE favour an increase in output when the OPEC meets in Vienna.
“We will at least close the gap between what we’re producing and official quotas. Whether we add more oil on top or not is still under discussion,” a Gulf OPEC delegate is quoted in a Reuters article.
Another delegate was also quoted as saying, “We’ll legitimise the difference but there is no need to add extra oil because demand is not as strong as we thought.”
Meanwhile, the world’s largest oil exporter Aramco has recorded a slight drop in its crude exports in 2010 to the same levels in 2009. Exports fell to 2.02 billion barrels in 2010 from 2.06 billion barrels in 2009 or to 5.5 million bpd from 5.65 million bpd in 2009, according to a company report.
Aramco exports 55.5 percent of its crude to the Far East, which is already Saudi Arabia’s main crude export market.
According to data provided by the Joint Data Initiative (JODI) and calculated by Reuters, Saudi Arabia produced on average 8.16 million bpd in 2010. Aramco’s oil reserves remained 260.1 billion barrels in 2010, the world’s largest.
Despite this drop in exports, the state oil giant is increasing output, and it looks like it’s mainly to cater to domestic demand, which seems to be growing at up to 6 percent annually.
There are plans, for example, to complete its first offshore non-associated gas field project in Karan, Saudi Arabia by 2012, as Kipp reports here. Meanwhile the company is speeding up developments of the Manifa oilfield as the company. After announcing in 2009 that this oilfield would not pump at full capacity until 2024, it will now reach full capacity by 2014—10 years earlier than was earlier indicated.
Aramco statements say the company is focusing on raising gas output to meet rising domestic demand for power and petrochemicals…so they say. Domestic demand for gas in the world’s largest oil exporter is reportedly growing at 5 to 6 percent annually.
Is the increased output in anticipation of a positive result from this week’s OPEC meeting? Perhaps. But it almost doesn’t matter these days for the drivers in Dubai, who are still continuing to scratch their heads about the unexplained absence of petrol in gas stations across Dubai.