Oil Traders Forecast OPEC Members Achieved 88% of Promised
Production Cuts
By Mark Pittman
Traders Forecast OPEC Compliance With Output Cuts at 88% in May
New York, May 30 (Bloomberg) -- OPEC members made almost 90
percent of their pledged oil output cuts in May, according to a
Bloomberg survey, as they followed through on a plan to remove
oil from the market and eliminate a global surplus.
The oil producers ''all promised to be good soldiers and
will not cheat in the short term,'' said Ric Navy, a trader at
Paribas Futures Inc. Like the nine other analysts and traders in
the survey, Navy said producers came closer in the past month to
honoring their promises. He pegged compliance at 93 percent.
The Organization of Petroleum Exporting Countries pledged to
reduce world output by 4.3 million barrels a day in a series of
agreements stretching back to April 1998. OPEC said it made an
estimated 82 percent of the cuts in April, the first month of the
producer group's latest round of reductions.
Reduced oil output from a group that accounts for a third of
the world's daily oil supply has helped end a two-year slump in
prices. While prices are down almost 10 percent in May, they're
up more than 50 percent since reaching a 12-year low in December.
Detailed estimates for May output from Bloomberg and other
sources, such as news services and oil consultants, will be
published in early June.
Spotty Record
OPEC had a spotty record on output reductions promised last
year, and many traders are skeptical that producers will stick to
their pledge. For instance, OPEC met only 78 percent of its cuts
in March, according to Bloomberg estimates.
The group's inability to reduce a worldwide glut last year
was part of the reason crude oil sank to a 12-year low of $10.35
a barrel in December. As recently as February, crude traded on
the New York Mercantile Exchange went for as little as $11.35,
though it rallied to $19 a barrel early in May as traders bet
OPEC members, whose economies were stung by the low prices, would
do a better job of adhering to their promised reductions.
''There will be minimal cheating,'' said Chester Irvin, a
trader at ABN Amro Inc. in New York. ''They're nervous because
they don't want the stuff to go back to $12 a barrel.''
Some traders have yet to be convinced that OPEC's compliance
will be any better now than it was last year.
''With the higher crude prices, there will be some
additional cheating,'' said Donald Draizin, president of R.A.D.
Energy Corp. in Purchase, New York, one of the biggest heating
oil and gasoline wholesalers in the New York metropolitan area.
''This has also been past performance. Why should things change
now?''
Others say compliance will improve.
''Not later than mid-June, compliance will be very, very
close to 100 percent,'' said Anthony M. Szabo, president of Stone
Bond Corp., energy consultants in Houston.
ESTIMATES OF OPEC'S COMPLIANCE
WITH ITS PLEDGED OIL OUTPUT CUTS
(in percent terms)
ABN Amro 86
Cargill 90
Cresvale 87
Eildon 92
Fimat 93
GSC Energy 85
Paribas 93
R.A.D. Oil 75
R.W. Baird 90
Stone Bond 88
Average (10) 87.9
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