[en] Recent models of the oil market have continued to employ dominant firm/monopoly type assumptions regarding OPEC behaviour. Other recent studies have highlighted the importance of the internal behaviour of OPEC. The paper attempts to provide a framework within which these approaches are compatible, and which provides a significant role for investment 'needs' as a key variable in determining price changes. (author)

[en] This paper examines OPEC's long-lived mechanism which targets the oil price and adjusts the quality ceiling to meet the target. The stability of this controversial mechanism is compared to that of two alternatives: one requires quantity control without any price targeting and the other is a synthesis of quantity control and the OPEC mechanisms. All three mechanisms passed the stability test and the two alternatives give rise to some interesting policy implications. Practicality considerations which involve the availability of specific information make OPEC's mechanism the most appropriate in terms of achieved targeted revenues. The paper also offers a convergence strategy that speeds up the achievement of targeted revenues under OPEC's current mechanism. (author)

[en] This paper reports that the Organization of Petroleum Exporting Countries has ducked the question of reestablishing quotas despite the looming prospect of a second quarter oil price slide. OPEC ministers meeting in Vienna late last month approved continuing free-for-all production in the first quarter and ordered the ministerial monitoring committee to tackle the question of second quarter production levels when it meets in Geneva Feb. 12. Oil markets responded to the lack of action by dropping futures prices

[en] First set up in 1960, OPEC has become a highly successful cartel and a key player on the world geopolitical scene. Through quotas and dragooning its members, it has maintained the world price of oil at a level much higher than the marginal cost of new oil from the largest producers by holding off new supplies which might otherwise have flooded the market. The two main factors which have made this persistent success possible are examined. They are OPEC's very low production costs vis-a-vis its competitors and the extent of the organisation's shut-in, low-cost reserves. (UK)

[en] This paper presents the OPEC Secretariat's latest outlook to 2025 for oil supply and demand. The results have been developed using the OPEC World Energy Model, OWEM. The next two decades are expected to see increases in energy demand met predominantly by fossil fuels, with oil set to continue to maintain its major role. There is also a clear expectation that the oil resource base is sufficiently abundant to satisfy this demand growth. Global oil demand rises in the reference case by 12 million barrels per day to 89 mb/d from 2002 to 2010, an average annual growth rate of 1.5 mb/d, or 1.8 per cent per annum, over the period. In the following decade, demand grows by a further 17 mb/d to 106 mb/d by 2020, and then by another 9 mb/d to 115 mb/d by 2025. Almost three-quarters of the increase in demand over the period 2002-25 comes from developing countries. In the short-to-medium term, overall non-OPEC supply is expected to continue to increase - rising to a plateau of 55-57 mb/d in the post-2010 period. The key sources for the increase in non-OPEC supply will be Latin America, Africa, Russia and the Caspian. In the longer term, OPEC will increasingly be called upon to supply the incremental barrel. Uncertainties over future economic growth, government policies and the rate of development and diffusion of newer technologies raise questions over the future scale of investment that will be required. These uncertainties, coupled with long lead times, inevitably complicate the task of maintaining market stability. Medium-term prospects suggest that there is a need to ensure that spare capacity is not too high and that it is consistent with sustained market stability. There are genuine risks of downward pressure on oil prices, and this could sow the seeds of instability. (Author)

[en] Continuous upward revisions to world oil demand projections for 2003 and 2004 are compared with the downward revisions that took place in 1998 and 1999, following the 1997 Asian economic crisis. Demand leads supply, in the current case, resulting in a time-lag in the whole supply chain, while supply led demand half a decade ago, with the OECD's commercial stocks reaching record highs. Recent months have seen a reversal of the longstanding inverse relationship between the United States of America's commercial crude oil stock levels and crude prices, and they are now moving in parallel. The fact that the US market is now adequately or even well supplied means that factors other than inventory levels are causing the present high prices. These factors are briefly outlined. OPEC is doing everything it can to maintain market stability, with prices at levels acceptable to producers and consumers. The agreement reached in Beirut on 3 June is the latest example of this. (Author)

[en] The purpose of this technical exercise is to apply econometric modelling to study the relationship between movements in the oil price and compliance by the Organization of the Petroleum Exporting Countries (OPEC) with its self-assigned production agreements, whose purpose is to bring order and stability to the international oil market. After introducing various methods of measurement of compliance, the study applies these methods to monthly data for 1995-2002 for OPEC. It then identifies the method ''over-production as a percentage of ceiling'' as the best-fitting and most accurate criterion for measuring OPEC compliance. The paper then elaborates on intervention analysis, explains the various types of intervention in detail and introduces a number of econometric models to monitor oil price movements resulting from OPEC's intervention in the oil market, along with the extent of its compliance with its agreements. On applying the models to a set of historical monthly data, the study finds that higher oil prices have been achieved when the effective level of compliance lies in the range of 94-99 per cent, and that lower oil prices have been experienced when there is less compliance and more volatility. The paper notes that the achievement of order and stability is the responsibility of all parties in an international market that is inherently volatile. (author)

[en] The future of the Organization of Petroleum Exporting Countries (OPEC) has become unclear. The oil cartel is suffering from growing internal strains which may threaten its future. In particular the crash of the dollar is undermining the dominant position of moderate member Saudi Arabia and strengthening the lobby of Iran and Venezuela

[en] An impediment to the process of economic diversification in OPEC and Alaska is the lack of favourable access to local and international capital markets to finance development projects, particularly mineral resource development. This paper highlights the importance of commodity-indexed bonds, including oil- and gold- indexed bonds, as a financing alternative to supplement the supply shortage of loanable funds from conventional, local and international commercial banks. The indexation concept is discussed, features of different bonds issued to date are contrasted and the benefits and risks for borrowers and investors are highlighted. An analysis is made of the experience of OPEC and Alaska in using commodity-indexed bonds and the feasibility of Alaska and some OPEC countries entering into commodity-linked-financed joint ventures is examined. Future prospects for commodity-linked bonds are explored. Not withstanding the fact that the immediate market timing is unfavourable, the long-term benefits of commodity-indexed securities are recognized. (U.K.)

[en] This study examines the time series behaviour of oil production for OPEC member countries within a fractional integration modelling framework recognizing the potential for structural breaks and outliers. The analysis is undertaken using monthly data from January 1973 to October 2008 for 13 OPEC member countries. The results indicate there is mean reverting persistence in oil production with breaks identified in 10 out of the 13 countries examined. Thus, shocks affecting the structure of OPEC oil production will have persistent effects in the long run for all countries, and in some cases the effects are expected to be permanent. - Research Highlights: →Mean reverting persistence in oil production with breaks identified in 10 out of the 13 countries examined. → Standard analysis based on cointegration techniques and involving oil production should be examined in the more general context of fractional cointegraton. → Analysis of outliers did not alter the main conclusions of the study.