Updates
December 7, 2015:
OPEC never was a cartel -- at least not since 1998 (and probably even earlier, but that's as far as the graph below goes).
Whatever hope the old cartel had of
reasserting control over the oil producing nations ended
on Yom Kippur of 1973, with the Egyptian invasion of the
Sinai. The renewed war in the Middle East caused an oil-buying
frenzy in Europe and Japan, as nations fought to build up
their reserves of crude oil. Saudi Arabia and other oil
producers adopted a policy of charging whatever the freight
would bear. Within weeks, the posted price for crude had
more than doubled to $5.60 a barrel. No OPEC control was
involved: it was a war that permitted individual nations
to raise their prices.
Another price explosion followed the
announcement by Saudi Arabia and other Arab states, in October
of 1973, that they were cutting back oil their oil production
and embargoing shipments of oil to the United States. This
cutback did not result from any OPEC decision, either. Indeed,
many OPEC states, including Iran. Indonesia, Venezuela,
Ecuador, and Gabon, actually increased production (and even
a few Arab states in OPEC, notably Iraq and Algeria, did
not reduce their production). It was almost exclusively
an initiative of Saudi Arabia.
Moreover, the Saudi decision
to shut down 10 percent of the country's oil production
was not based entirely on considerations of the plight of
the Arabs. The Senate Subcommittee oil Multinational Corporations
ascertained from testimony of American engineers who were
responsible for operating the Saudi fields in 1971) that
a 40 percent cutback in the giant Ghawar field was required
for the installation of water injection equipment. If it
had not made these cutbacks, the entire reservoir of oil
would have been jeopardized. Jerome Levinson, the general
counsel of the committee, writing under the name Peter Achnacarry,
stated: ". . . the embargo saved Saudi Arabia from the embarrassment
of having to explain supply shortages resulting from technical
problems."
By cloaking the cutback in a political purpose,
the Saudis were able to induce other Arab producers, both
inside and outside of OPEC, to join them.
In the wild price spiral that followed
the Saudi shutdown, the official OPEC price was completely
disregarded by other members. Iran and Qatar held auctions
to determine how high they could raise prices. At its subsequent
meetings, OPEC could do no more than ratify the prices that
had already been established by a panicked market.
Original Post
I get a kick out of the
Bloomberg interpretation of the graph below: "OPEC's crude production has exceeded its target for 18 months straight." Really? OPEC has
greatly exceeded its target since 1998. It appears that on only two occasions did production actually hit or drop slightly below target in the past 17 years or so. What's this "18 months straight" crap? Yes, strictly speaking, but absolutely "inaccurate." In addition, the delta between the target and actual production was much, much wider in the early days of the Bakken boom (2009 - 2012) than it is now.
Speaking of graphs, I forgot to post
the weekly natural gas fill / draw rate (a dynamic link). I believe this is the first week this year that there was an overall net draw on natural gas, down 53 Bcf.
Working gas in storage was 3,956 Bcf as of Friday, November 27, 2015,
according to EIA estimates.
This represents a net decline of 53 Bcf from the previous week. Stocks
were 543 Bcf higher than last year at this time and 247 Bcf above the
five-year average of 3,709 Bcf.
At 3,956 Bcf, total working gas is above the five-year historical
range.
