OPEC Raises Oil Production Again - OPEC said Friday its May production rose for a second month, as member countries pumped more oil following a sharp rally in oil prices. OPEC said in a monthly report that its May output averaged 28.27 million barrels a day, up 135,000 barrels a day from a month ago. The OPEC reference basket price, a benchmark price for oil delivered by the group, surged nearly 14% to average $56.98 a barrel in May. OPEC also said 2009 global demand is expected to drop 1.6 million barrels a day from a year ago, a forecast that's unchanged from their previous estimate made a month ago.
With OPEC controlling about 1/3 of all oil production in the world, they obviously play an important role in setting the price based on supply/demand. Over the past year, they have been criticized for taking advantage of the dramatic run up in oil prices with the peak of nearly $150 a barrel last year. At that time, nearly all member nations were producing at capacity due to the high demand and price.
After oil started to drop substantially due to the reduced demand, OPEC tried (sometimes unsuccessfully) to reduce the production output from the member nations. Smaller nations wanting to keep the influx of cash flowing continued high production levels even at reduced prices. Eventually, OPEC sought to enforce production quotas to essentially put a floor in the oil market. OPEC said that they wanted to stabilize the market, and the way to accomplish this goal was by production quotas.
One of the main issues is that if oil prices continue to rise, this could slowdown the progress of the global economic recovery that has been seen thus far.
OPEC is quite honestly in a precarious position. They have a product that is widely needed to "fuel" a recovery, but if they take too much advantage of that position, they become the ones hampering the recovery. If this happens, they will continue to look like the bad guy.
Economic Data Releases for Next Week
Monday - manufacturing survey for the New York region; housing index from the National Association of Home Builders
Tuesday - May producer price index; housing starts; industrial production
Wednesday - May consumer price index; weekly petroleum inventories
Thursday - weekly jobless claims; manufacturing survey for the Philadelphia region
With OPEC controlling about 1/3 of all oil production in the world, they obviously play an important role in setting the price based on supply/demand. Over the past year, they have been criticized for taking advantage of the dramatic run up in oil prices with the peak of nearly $150 a barrel last year. At that time, nearly all member nations were producing at capacity due to the high demand and price.
After oil started to drop substantially due to the reduced demand, OPEC tried (sometimes unsuccessfully) to reduce the production output from the member nations. Smaller nations wanting to keep the influx of cash flowing continued high production levels even at reduced prices. Eventually, OPEC sought to enforce production quotas to essentially put a floor in the oil market. OPEC said that they wanted to stabilize the market, and the way to accomplish this goal was by production quotas.
One of the main issues is that if oil prices continue to rise, this could slowdown the progress of the global economic recovery that has been seen thus far.
OPEC is quite honestly in a precarious position. They have a product that is widely needed to "fuel" a recovery, but if they take too much advantage of that position, they become the ones hampering the recovery. If this happens, they will continue to look like the bad guy.
Economic Data Releases for Next Week
Monday - manufacturing survey for the New York region; housing index from the National Association of Home Builders
Tuesday - May producer price index; housing starts; industrial production
Wednesday - May consumer price index; weekly petroleum inventories
Thursday - weekly jobless claims; manufacturing survey for the Philadelphia region
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