OilVoice - Kuwait Aligns Itself with OPEC Quota Cuts

Kuwait Aligns Itself with OPEC Quota Cuts

Tuesday, January 06, 2009

In the wake of the Organisation of Petroleum Exporting Countries' announcement, to cut future output quotas back at the cartel’s General meeting on December 17, Kuwait has become the latest non-OPEC nation to step in line with their plans.

The Arab Emirate has this week notified two Asian lifters that it plans to cut crude oil supplies loading, from January 22 onwards, by some 5%. The move comes in an attempt to stem the long slide in oil prices seen during the second half of 2008.

The state-owned Kuwait Petroleum Corporation (KPC) also informed the Asian lifters that it would continue to disallow customers to utilise "operational tolerance" on cargoes to load up to 5% above term volumes for its crude – a ban it first imposed in late December.

Kuwait, the world’s seventh largest oil producer, follows in the footsteps of the United Arab Emirates (UAE), Libya, Venezuela and Angola in announcing a reduction in oil output levels.

There is also unconfirmed speculation that the producer-nation is set to cut supplies by as much as 10% to buyers in both the United States and Europe, in tandem with those already announced to Asia – to whom Kuwait currently exports around 75% of its 2.6 million bpd supply.

A cocktail of growing confidence in OPEC’s implementation of, and compliance with, its own cuts, along with escalating violence in Gaza between Palestine and Israel has helped contribute to a sudden jump in international oil prices. Prices climbed to just under $49 a barrel in early day trading on Tuesday, up from a near $32 low seen in mid December.

Many analysts were initially sceptical of OPEC’s intentions when the group announced its intention from Oran, Algeria, to make a further 2.2 million barrel a day cut, from January 1 onwards. Since July 2008’s oil price peak OPEC has introduced a cumulative 4.2 million barrels per day (bpd) of output cuts.

OPEC has been accused of not implementing previous cuts stringently enough and subsequently the resulting market response to the news coming from the Algerian summit was that it would fail to bring about any significant price change.

Iranian Oil Minister, Gholamhossein Nozari, said: "If OPEC member states are not determined… the price of oil will continue to drop."

"The member states have adhered to the previous two decisions by around 58& and I think that the recent decision calling for the 4.2 million bpd cut in production was a serious decision," he added.

Iran’s OPEC representative, Mohammed Ali Khatibi, said on Monday that the Vienna-based group is set to hold an Extraordinary General Meeting (EGM) next month, in Kuwait.