OPEC-11 to Cut January Supply 5%, PetroLogistics Says (Update2)

asr: see Goldman $30 short-term forecast (see 2 posts below) got wrong as goldman did not expect 5% cut from OPEC as opposed to announced 2.5%
Jan. 23 (Bloomberg) -- OPEC will cut supplies by about 5 percent this month as the group implements production constraints announced in December, according to preliminary estimates from consultant PetroLogistics Ltd.

Oil supply from 11 members of the Organization of Petroleum Exporting Countries subject to quotas will average 26.15 million barrels a day in January, down from 27.65 million barrels a day, Conrad Gerber, the founder of PetroLogistics, said today by telephone from Geneva. From this month, members have a production quota of 24.845 million barrels a day. Iraq has no quota.

Saudi Arabia, the group’s largest member, led the cuts, lowering supply to 8.05 million barrels a day in January from 8.6 million a day last month, Gerber said. The kingdom’s new total is in line with its Jan. 1 quota.

“The latest OPEC supply data gives me confidence we’ll see a drawdown in inventories globally,” said Gareth Lewis-Davies, an analyst at Dresdner Kleinwort Group Ltd. in London. “The amount of OPEC supply reduction far exceeds the drop in demand.”

OPEC, responsible for about 41 percent of the world’s oil, agreed a record supply reduction at its last meeting on Dec. 17 as demand and prices collapsed. Crude futures traded around $43 a barrel in New York today, having lost more than $100 a barrel from an all-time high reached in July.


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Oil May Rise as OPEC Members Cut Output, Survey Shows (Update1)

Saudi Arabia, OPEC’s biggest producer, has decided to cut output by 300,000 barrels a day below its OPEC quota to prop up prices, Algerian Oil Minister Chakib Khelil said on Jan. 21, according to the state-run newspaper El Moudjahid yesterday. The spread between front-month contracts and later months declined this week, reducing the incentive to stockpile crude oil.

“With the recent gains in price and the flattening out of the forward curve, we may be seeing the first evidence that the OPEC production cuts are having an impact on the crude oil market,” said Tim Evans, energy analyst with Citi Futures Perspective in New York. “If so, this could be the start of an ongoing price recovery.”

New production targets for OPEC members came into effect Jan. 1 following a Dec. 17 meeting in Oran, Algeria. The 12- member group needs to make the deepest supply cuts in its history to comply with the revised quotas. The group’s next meeting is scheduled for March 15.

The price for oil for delivery in April is $2.74 higher than for March, down from a $4.45 premium on Jan. 16. This structure, in which the subsequent month’s price is higher than the one before it, is known as contango.

The oil survey has correctly predicted the direction of futures 48 percent of the time since its start in April 2004.

Bloomberg’s survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:

RISE NEUTRAL FALL
13 6 11