OPEC nations concerned over the continuing low
market prices for oil met at the end of March to try to bolster prices
by cutting supply. Oil markets let out a collective yawn over the cartel’s
efforts.
In a Reuters story, Steve Wyatt, managing
director of U.S. Petroleum Ltd., noted there is an enormous barrier to
OPEC’s supply cutting efforts. “We are at a 20-year high in stocks
of products and crude oil,” Wyatt said. In order for OPEC to have
any upward effect on oil prices any production quotas would have to be
strictly maintained. Unfortunately OPEC doesn’t have much of a history
in recent years of getting its members to stick to such quotas. For example,
Venezuela’s OPEC quota is 2.583 million barrels of oil per day, but it
pumps nearly 3.2 million barrels per day.
That is unlikely to change any. Two key oil
producing nations, Indonesia and Iran are both unlikely to maintain their
quotas even if they do give public lip service to them — both nations
need the currency garnered by oil sales. In addition Iraq will sell every
bit of oil the United Nations will let it, and Iraqi oil output is only
likely to increase in the foreseeable future.
The bottom line — cheap oil and gasoline are
going to remain a reality for the near term, though gasoline prices may
begin to rise to moderately higher levels in midsummer.