OPEC Production Changes Impacted World Crude Oil Prices
Sources: History: EIA; Projections: Short-Term Energy Outlook, July 2000.
Notes:
- OPEC has been a major factor behind the recent swing in crude oil prices.
- As prices fell in 1997 and 1998, OPEC gradually removed supply from the market. In total, OPEC targeted cutbacks of 4.3 million barrels per day representing about 6% of world supply.
- With the last cutback in March 1999, prices reversed and climbed rapidly. As they exceeded $30 per barrel in 2000, OPEC began returning supply to the market.
- This year, following OPEC’s announcement in late March 2000 that production quotas would increase, prices fell in April. However, prices rebounded when the actual increase in OPEC oil production was insufficient to meet demand and rebuild inventories to normal levels.
- This prompted OPEC into another quota increase which was announced in late June. But, when prices still did not fall, Saudi Arabia, on July 3, announced its intention to increase production even further.
- Production levels for all of OPEC (including Iraq) are assumed to rise about 2.6 million barrels per day from the first quarter to the fourth quarter this year.
- The EIA base case assumes OPEC-10 production (excluding Iraq) will increase about 1.9 million barrels per day from first to fourth quarter, putting them over 0.8 million barrels per day above their new quota by the end of 2000.
- This additional OPEC supply combined with non-OPEC production increases should put downward pressure on prices.