Oil Markets

John van Schaik

The world's economic life is built on oil. Crude oil provides nearly half the energy the world consumes, from cars, trucks and ships to power stations supplying electricity to cities and businesses. The petrochemical industry turns oil into thousands of products, from plastics to lipstick. Two-thirds of all oil products are used for transportation, and without oil the world would literally come to a standstill. This global dependency on a finite resource makes oil a strategic commodity and puts the oil market under a lot of scrutiny, especially when prices rise as sharply as they have in recent years. One reason oil is present in so many spheres of life, is that we have taken for granted that petroleum is available in abundance at an affordable price. But that is no longer a certainty. Demand for oil has risen fast thanks to the rapid growth of developing economies, particularly in Asia and the Middle East. At the same time, supply has been struggling to keep up with demand, mostly because producing countries limit access to their reserves. Increased oil demand and the growing belief that the world might soon reach a peak in oil output pushed oil to a new record in July 2008, when a barrel (159 liter) hit $147, up from $30 five years earlier. However, as the global economic crisis took hold the price plunged to below $50 in a matter of months as demand shrank dramatically throughout the world.

The price rally seems a classic case of supply-and-demand fundamentals, because demand is expected to outrun supply in years to come – although, so far, it has not. But other factors are weighing heavily into the price, including the value of the US dollar; hefty bets on oil prices from speculators; political tensions in producing countries such as Iraq, Iran and Nigeria; changes in output policies from the Organization of Petroleum Exporting Countries (OPEC); and a lack of refining capacity in consuming countries.

Oil is measured in “barrels” and the output of a company or country is measured in “barrels per day,” abbreviated as “bpd.” It is traded primarily on the New York Mercantile Exchange (NYMEX) and in London on the ICE Futures exchange. Traders deal in spot or short-term contracts, and also in “futures contracts” – agreements to deliver a certain grade of oil at a certain price on a certain day. These benchmark grades see sufficient trading to serve as reference points and include West Texas Intermediate (WTI), which trades on NYMEX and Brent, which trades on ICE. Futures contracts allow companies to “hedge,” that is sell future production at a set price today, enabling that production to go ahead knowing a buyer is waiting, or for a buyer to lock in a price today for crude he knows will be needed several months hence.

In addition to crude oil contracts, the exchanges also handle numerous products such as gasoline, heating oil, and these, too, can move sharply on news.

Oil grades have two components: weight and sulfur content. Weight, is classified as light, intermediate or heavy, with lighter grades considered more valuable because they are easier to refine. Light grades thus typically command a higher price than heavier grades. The weight is measured by an API rating given by the American Petroleum Institute, an industry group. An API rating in the low 20s or lower is considered heavy, an API in the 30s or higher is considered light, and intermediate covers the range between.

Because sulfur corrodes engines and makes gasoline more polluting, it must be removed in refining. Low sulfur grades, known as “sweet,” command a premium price, while those with substantial sulfur are “sour” and are less valuable. Sour oil has more than 1 percent sulfur, which is unattractive because refineries must take that out in hydrotreaters when making ultra low sulfur gasoline and diesel.

Typically, light crude gives the most products when refined. A light grade in most cases is also sweet, which means it gives the cleanest products. Heavy sour crude is priced at a discount to light sweet, as it yields fewer valuable products. Only refineries with complex and very expensive upgrading capacity can turn heavy sour crudes into clean transportation fuels – the fuels the world needs most.

Some crude oil is used for direct burning in power plants to generate electricity, but nearly all is feedstock for refineries. A refinery is in fact a controlled fire. It heats crude oil and separates gasses and liquids, from light naphtha to heavy residual fuel.

Refinery centers are close to where the consumption is. The crude might be processed by independent refineries, such as Valero in the US or Petroplus in Europe, which do not produce oil and buy it in the market. Oil also can end up in refining units from integrated oil companies. These are the larger international companies that produce, ship and refine oil and then sell products in gas stations. They are integrated because all this is happening under one name, such as Exxon Mobil or Royal Dutch Shell.

Reporting

The Price

The oil price is quoted in dollars and cents, but it is often hard to pin down why a barrel rises $4 one day and falls $3 the next. Many factors play a role. A coup in an oil producing country or an attack on nuclear sites in Iran would drive oil prices up. A peace accord between fighting factions in an oil region or a decision by OPEC to produce more oil could deflate the price. As reporters, we typically telephone traders and analysts to ask what moved the price. These experts often simply link a price movement to major news events of the day, even when there is no obvious correlation or when that news event would suggest the price going the other way than it did. And analysts differ greatly about what a fair price for oil would be. Some think $60 per barrel is a reasonable price; others argue that it should be $120. Reporting on oil often means writing about that strange mix of political, fundamental, financial and economic pressures that move the price.

Reporting on oil also can include new oil fields; long-term energy outlooks; licensing rounds; company results; drilling; fuel subsidies; military conflicts; fuel specifications; labor disputes; refining; oil spills; taxation; the value of the US dollar; the global environment; gasoline prices; shipping; speculation; boundary disputes and more.

This complex set of issues changes all the time. Adding to the complexity is that high prices have set in motion a whole set of social, economic, financial and political changes that will have a profound impact on how the world is using oil. Many of these changes are recent, and still barely understood even by oil professionals. High prices have consumers looking for alternatives, and have been blamed for high food prices and rising inflation. This reshaping of the industry fundamentals coincides with a growing global awareness that oil consumption – and its CO2 emission – contributes to global warming. Where the fundamental and environmental journeys end and how they will interact is unclear, but it is fair to assume that oil will remain expensive.

Common stories

Major stories that come up on a regular basis include investments by big oil companies in new fields, terminals, pipelines or refineries; disputes between labor and management; the conditions under which governments allow companies to operate in a country; bribes and fraud along the chain; how oil is marketed and sold, directly to refineries or via traders and middlemen; how oil is stolen from fields or products from refineries by bandits; the actual output volume in big fields and for a country as a whole; investments in cleaner technologies; efforts to capture natural gas currently flared; and the volume of a country's reserves.

Sources

Key sources can typically be used for a variety of stories, since analysts who keep an eye on oil have to cover a wide array of events to understand the powers at play. So an analyst with a bank will be a good source, as will be an official with the oil labor union and a manager with an oil company or an organizer with a local non-governmental organization. Keep a keen focus on what their interests are. Try to talk to technical people before you speak to the political officials. The technical people know exactly what the facts are, while the political officials do not always and will give the stories a spin to suit their agenda.

When the oil price spikes on the global level, it is important to explain what this means for your audience. Does this mean the price of local gasoline and diesel will go up? Are subsidies in place that will shield the local consumers? What do new oil field or refinery developments mean for income for the country? Are investments creating new jobs and training for locals, or are foreigners coming in for all key positions? Do foreign and domestic investors take care of the environment and ensure the health and well-being of the local population? Do people benefit from land given up for running pipelines?

Major Producers

Key reserves and production is in the Middle East, the Americas, Africa, Russia and the Caspian region. Major producers include Saudi Arabia, Russia, the US, Iran, Norway, Iraq, Canada, Venezuela, China, Mexico, Nigeria and Angola.

The world's largest consumers, such as the US, Japan, Germany, the UK, Italy, Spain, France, South Korea, are large oil importers, with the exception of the UK. They are all members of the Organization for Economic Development and Cooperation, the OECD. Developing economies, known as non-OECD economies, including China, India, Saudi Arabia and Iran see their consumption grow rapidly.

Only a few large consumers are also net exporters of crude oil, including Canada, Russia and Saudi Arabia. Brazil recently joined this exclusive club.

The Middle East is by far the most important oil producing region, generating a quarter of the world's 85 million bpd consumption and with the largest reserves and the largest concentration of big producers, including Saudi Arabia, Iran, Iraq, the United Arab Emirates, Kuwait, and Oman. Other key producing centers are in Russia, the Caspian, the North Sea, the US, Latin America, China, and West Africa. The most promising production growth comes from the Caspian and West Africa.

They all produce a variety of qualities. Though different grades can be found anywhere, Latin American crudes are typically heavy and sour, West African grades are light and sweet, the Mideast has a lot of medium light and sour oil, as does Russia.

Protesting oil price rises

Rising oil prices have created pain for consumers worldwide as they pay more for transport, food and heat. Rising prices are even destabilizing governments that subsidize fuel, such as India and Indonesia, and see their budget deficits and inflation rise.

In spring 2008 citizens in Haiti, Pakistan, Thailand, Egypt and the Philippines, among other nations, took to the streets to protest exploding prices for rice and wheat. Though fuel costs contribute only an estimated one-third to higher food prices, the social havoc of actual food shortages created a sense of urgency that the world should act in a united way to bring oil prices down. At the initiative of the world's largest oil exporter, Saudi Arabia, oil consumers and producers met in Jeddah, Saudi Arabia, in June 2008 to address skyrocketing prices. But they had no answers. Consumers such as the US, Japan and the UK and producers including Saudi Arabia, Iran and Mexico said there was no silver bullet to alleviate the oil pain. What did it eventually was the world economy “falling off a cliff” in late 2008. So severe and volatile has the global economy been that few analysts have been willing to say anything firm about the outlook for oil – or anything else for that matter – although the consensus still seems to be that the oil price will be among the first to rise when recovery sets in.

According to the laws of supply and demand, a high price is supposed to reduce oil demand so that there is ample oil to meet consumption. At the same time, there should be enough spare capacity to deal with supply disruptions from weather or war. The price of oil is anticipating events, such as a military conflict by calculating what the damage could be.

Traders mention intangible factors such as geopolitical tension to explain price movements. The March 2003 U.S.-led invasion in Iraq and its destabilizing aftermath are key factors for the oil price. U.S. and Israeli threats to attack Iran's nuclear installations make the Middle East region more tense than before. And that matters, because the Middle East is where most of the world's oil reserves are, and here is where the world buys close to 20 million barrels per day of oil and refined products – nearly a quarter of the 86 million b/d it consumes and roughly half the oil that is traded every day.

OPEC Policies

During the price rise in recent years, OPEC, the Organization for the Petroleum Exporting Countries, received a lot of blame for not opening its taps to cool oil prices. OPEC – founded in 1960 to fight the power of big western oil companies that controlled their reserves, their output and oil prices – produces 40% of all oil consumed. OPEC's 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. The organization had a good track record in keeping prices stable at $30 from 2000-03 by tweaking output. Yet, when demand rose fast in China, India and smaller Asian economies, prices spiraled higher, no matter how much OPEC produced. After the summer of 2004 OPEC lost its grip on the market as spare capacity slipped to low levels.

Spare capacity is the world's cushion that can be tapped when supply disruptions hit the market. Saudi Arabia, the kingpin OPEC producer, is the only country with major output reserves, and the kingdom prefers to have 1 million to 2 million b/d of spare capacity. Maintaining that spare capacity costs a lot of money, but also provides Saudi Arabia with extraordinary powers in the world's oil scene. The Saudis can bring that spare capacity on line when strikes hit producing countries, or hurricanes and wars or civil strife shut in production. To stabilize the price, spare capacity needs to be some 4 percent of demand, or 3.5 million b/d. By the end of 2004, that capacity had fallen below 1 million b/d, which made the market nervous as the world had little room for error. The Saudis are not shy about using the power of spare capacity. In the mid-1980s, for example, Sunni Saudi Arabia increased output to bring the oil price down in an effort to lower the income for Shiite Iran, which was fighting a bitter war with Iraq.

The Saudis are not always able to control prices. By the summer of 2004, the oil price rallied no matter how much the kingdom produced. This was also at a time when the oil market saw enormous inflows of speculative capital. Trading volumes on the Nymex grew and prices rallied higher, gyrating like never before. The oil price dipped shortly below $50 in early 2007, only to race higher after that. OPEC, basically reduced to a bystander in this maelstrom, blamed everything but a lack of supply for increasing prices, and blamed mostly the speculators from rich Wall Street investment banks and hedge funds. It certainly did not want to take the blame for the softening of the global economy, which, OPEC said, was mostly the result of the sub-prime mortgage crisis in the US.

Economists had expected the world economy to fall apart when oil hit $50, but it did not budge even when oil reached $80 or $100. That gave OPEC the idea to explore a new strategy where it would go after the highest possible oil price that the world could afford. The basic principle of that strategy is to limit oil output, extract the highest possible oil price and extend the life of OPEC's oil fields. Certainly, this new thinking has jacked up the price of oil. But OPEC is not so powerful that it alone can dictate the world's petroleum strategies. Other forces are at play. In 2008, OPEC’s limited power was demonstrated as the oil price fell from $147 in mid-July to $75 in mid-October and further to below $50 by the end of that year.

Supply Stress

The lack of spare capacity is the result of a lack of investments in new fields, in part designed by OPEC, in part by economics. After oil prices fell as low as $10 in the late 1990s, oil companies trimmed all their fat and lost a lot of skilled labor when they fired and retired engineers and managers. Meanwhile, the big companies – known as Big Oil and including names such as Exxon Mobil, Royal Dutch Shell, BP, Chevron and Total – also had in years past lost access to big reserves and fields in the Mideast after these countries had nationalized their oil production. Back in the 1970s, national governments had control over just a sliver of all the world's oil reserves. Now it is over 90 percent

On top of that, life was made difficult for Big Oil in Venezuela and Russia where resource nationalism, the desire of governments to regain ownership of natural resources, plays a big role, and other countries might go that route. Initially, OPEC was not in a rush to add a lot more spare capacity as it thought that higher oil prices would destroy demand. That would leave OPEC producers with very expensive capacity to produce oil that would not be used and, on top of that, would probably lower the price of oil – too much for members' liking. Even as prices threatened to approach $200 before the economic crisis blew in from the US housing market, OPEC was still not in a rush to add capacity after it became clear that higher oil prices would not destroy as much demand as thought. OPEC counters it has more than 100 projects in development. But that would have been many more if OPEC would have wanted to keep prices down and would have kept foreign companies in a major role to develop their resources.

Demand

The extreme nature of the recession that gripped the world economy in 2008 and beyond made it almost impossible to say much about the outlook for oil demand. Before the crisis really took hold, despite oil prices zooming past $100, global oil demand was still expected to rise by between 500,000 b/d and 1 million b/d per year in the foreseeable future. The upstream and downstream sectors would have had to grow at that volume as well to keep the market in balance. Of the world's total 86 million barrels per day in oil consumption, some 50 million b/d is used in the countries from the Organization for Economic Cooperation and Development (OECD) – a group of industrialized nations, including the US, Canada, the UK, France, Germany, Italy, Spain, South Korea, Japan and Australia. The US is the largest guzzler of them all, with some 20 million b/d, accounting for nearly a quarter of the world's consumption though it has only 4 percent of its population. But US consumption is reacting to higher prices. US oil use was down 800,000 b/d in the first half of 2008 compared with the first six months of 2007. The crisis eroded that further as the decline deepened, and in the long term there is the question of whether alternative energy sources will be as passionately pursued as Barack Obama insisted both during his presidential campaign and when he set about trying to return the US economy to health from the White House.

Before the crisis, consumption rose fast in developing non-OECD countries such as China, India and the Middle East, where economies were growing rapidly and citizens bought subsidized fuel at prices well below market rates. These countries, the crisis notwithstanding, are creating a new middle class that drives cars, cools homes and takes holidays – burning lots of fuel in the process. That growing middle class was also seen as a key contributor to rising food prices in the world.

Speculators

For all this fear that the market might run short, at no time during the price rally since 2003 was there a physical shortage of crude oil or refined products. But speculators put big bets out that the world would run short, and that oil prices would rise. Speculators argue that the world is so dependent upon oil for all it does that it cannot switch to biofuels or nuclear energy from one day to the next. Speculators also discovered a strong correlation between the dollar and the oil price. When the dollar weakens, the oil price goes up and vice versa.

There was a tremendous inflow of speculative capital into the futures markets, for base metals, gold, agricultural products, but especially energy. Commodity index funds raised their presence on the Nymex to over $250 billion in investments by 2008 from a mere $8 billion in 2001. The trading volume on the exchange more than tripled in the years before the crisis. Some traders argued that the energy market was not big enough to absorb all that capital. They said the positions of speculators on the Nymex and other markets had gotten so big that they could push prices up or down. Regulators studied the capital flows and said that speculators could exacerbate a price trend but do not set the trend.

Natural Gas

When producing crude oil, large volumes of natural gas often come to the surface as well. Just a decade ago, all that gas would be flared, or burned off at the site. Now, however, countries are keen to either use that natural gas at home to feed power stations, or to sell it abroad. When used domestically, the gas gets piped to its destination. For overseas sales, gas is cooled and transported on a vessel as liquefied natural gas. Nigeria has made lots of progress capturing this so-called associated gas, but security issues have prevented the country from meeting its end-2008 deadline to end all flaring.

Alternative Fuels

Higher prices created lots of alternatives. Out of nowhere, the US became the world's largest ethanol producer. The fuel, made from corn, was mixed into US gasoline at a rate of 600,000 barrels per day – a trickle when compared with global oil demand of around 86 million b/d. By 2008 the world was rethinking biofuels as many competed with food production. In general, fuel from garbage or so-called second generation cellulosic fuels are not very advanced yet. In overall volumes, biofuels will not make a big dent in oil demand.

Oil In West Africa

As an oil-producing region, West Africa is of crucial importance to the world. Its key producers Nigeria, Angola, Gabon, Chad, Equatorial Guinea and Congo Brazzaville pump some of the most sought-after crudes. Their grades typically fetch among the best prices in the world. The region's oil is low in sulfur content and produces a lot of gasoline and diesel.

West Africa is popular with international oil companies since it is one of the few oil regions left in the world where they can grow their output of oil and natural gas. Though West African governments claim a bigger say in oil developments and a bigger slice of the petrodollar, the fact is that they need the big companies to provide the financial muscle, the management skills and the technical and market knowledge to pull these large projects off.

Money in West Africa

Oil has been labeled a curse for many developing countries. The oil money is not alleviating poverty and uplifting ordinary Africans. Instead it is producing nepotism and corruption. Never mind that most constitutions proclaim that citizens own the country's natural resources, including oil. Little is known where exactly the money ends up as governments, even the democratically elected ones, consider oil income a state secret and deliberately block transparency. Oil contracts are kept secret and it’s often impossible for citizens to find out the terms of the deals made by their governments with foreign oil companies.

West African countries produce a combined 5 million b/d, of which Angola and Nigeria each produce 2 million b/d. This combined output generates $500 million per day with oil at $100 per barrel. Part of that goes to the international oil companies, part goes to running the fields. When oil was at $100, roughly $300 million per day should have flowed back to the region. In the past decade, sub-Saharan African nations have attracted more than $50 billion in investments in their oil fields, the largest investment ever in the continent. What has the region to show for all these petrodollars?

Nigeria

Nigeria has many of the best oil grades refineries can buy. But militant have shut in at times a quarter or more of the 2.8 million b/d production capacity. Output in 2007 was below 2.1 million b/d, down from 2.3 million b/d in 2006. The Nigerian government has started a process of reforming the national oil company, Nigerian National Petroleum Corporation (NNPC), and of cutting the influence of middlemen who are thought to siphon off vast sums of oil income.

Nigeria is one of the few countries adding new producing fields. Chevron started up the new Agbami field in August 2008 and Total's Akpo field was expected to follow later. A growing volume of Nigeria's production comes from offshore installations. Many large companies are operating alongside the NNPC, including Royal Dutch Shell, Exxon Mobil, Chevron, ConocoPhillips, Total, StatoilHydro, Petrobras, Addax and Eni. Nigeria's refining industry is being rebuilt, but the country must import gasoline and other products to meet domestic demand. The US is the largest buyer of Nigerian crude.

Angola

By mid 2008, Angola had become the largest crude oil producer of West Africa as output came to 1.99 million b/d, just ahead of Nigeria. BP, Total and Exxon Mobil have recently started up new fields, adding to Angola's rapid output growth, which was 20% in 2007. US Chevron, Norwegian StatoilHydro, Italian Eni, Brazilian Petrobras and Portuguese Petrogal also produce in Angola, and they mostly work alongside the Angolan national producer Sonangol.

Angola's boom might be over quickly, though. New fields are further out and deeper in the sea, where the geology gets more complicated, and the reserves might only be large enough for a 10-year life, after which output would start falling again. China is the largest buyer of Angolan crude.

Equatorial Guinea

Production is expected to rise sharply and might, sometime in the future, reach the prediction of Equatorial Guinea's Department of Energy of 570,000 b/d – well up from the current 350,000 b/d. Three crude streams are in operation: Zafiro, Ceiba and Alba. Exxon Mobil-operated Zafiro is the largest stream, but output has dropped to 210,000 b/d. New companies drilling in the country are mainly smaller firms from Africa and Asia. The country has no refining capacity, and imports all products. The government is unhappy with Exxon, which flares lots of natural gas that the government wants to capture and sell as liquefied natural gas. Exxon is facing large fines.

Gabon

Output in Gabon is thought to be 255,000 b/d in 2008, and oil drives the economy. It accounts for 70% of exports and 50% of GDP. But Gabon's fields are in long-term decline, and output is 100,000 b/d lower than a decade ago. The country's reserves are being depleted quickly. Shell, Total, Addax from Switzerland and the government plan major investments. Gabon hopes offshore blocks will help turn the tide of falling output. A number of smaller companies is starting up new, small fields. The US is the largest buyer of crude from Gabon.

Chad

Oil companies think Chad is a risky place to invest. The government is changing its operating terms, the oil is of poor quality and it is hard to extract. The country's output is around 210,000 b/d. Exxon, Chevron and Malaysian Petronas, Libyan Tamoil Africa and China National Petroleum Corp. are all active here. Although the government is using oil money to fight militant factions, resentment against the oil companies is not as widespread as in Nigeria. The Exxon-led pipeline Chad-Cameroon has paid more than $2 billion so far in taxes and fees to the government of Chad.

Congo Brazzaville

Congo's oil production was on the rise after 2000, but was badly affected by a fire on the N'Kossa platform in 2007. This brought output down by 40,000 b/d to 230,000 b/d and delayed the development of other fields that were supposed to tie in with the N'Kossa platform. Congo might become a big producer if a dozen or so companies prospecting for oil find deposits. Total is the principal oil company in Congo, ahead of Italy's Eni, which will invest $4.7 billion to develop heavy oil. China is the largest buyer of Congolese crude.

Tips for reporters

– The Nymex or ICE Futures (previously the IPE) have around-the-clock trading on electronic platforms. The oil price will react to news events as they unfold. Talk to traders and analysts about what events might affect the price and why.

– Many wire services will mention oil price movements in connection with key news events from the day. They suggest a correlation that many times is not there. Talk to traders and analysts for more detailed information.

– The oil price seems more and more a reflection of perceived future oil shortages. Keep an eye out for the short-term and near-term market forecasts from energy agencies.

– Speculation about OPEC's output strategy always puts the market on edge – a knee jerk reaction no longer really valid now. Ask ministers or OPEC governors what they think the output should be. But also remember that OPEC's recent policy has been to simply balance the market, and quietly tweak output when necessary.

– Always try to find out what OPEC members' actual output is, not the "output target" they have committed to on paper. Some producers might be producing more or less than officially allowed.

– When the market is tight, with supply struggling to meet demand, supply disruptions might have a dramatic impact on prices.

– When a disruption takes place, find out how much oil is at stake, the cause of the disruption and the expected duration of the outage.

– Try to get as much basic information as possible on overall output in a country, be that a government or a company or an independent agency: how much is oil (and gas) output; who are the producers; what are the fields; what is the quality; where is the oil going; what price is the oil selling for (the EIA website, see below, has a nice list for key crudes)?

– Many governments want to renegotiate production contracts with oil companies. What are the new terms they want; how are they different from the current terms; what drives a country to change the terms; what are the companies saying?

– West African governments are keen to increase output and revenues. Are countries following a similar strategy? Are they offering blocks to be explored? Are they talking to Big Oil, or also to smaller firms? Are they playing western companies out against eastern ones?

– Are West African governments well equipped to get the best deal in complex contract negotiations with oil companies? Are different oil firms operating under the same terms in the same country?

– Companies are keen to tell their side of a story. Keep in mind they are looking after their own interests: high revenues, low costs.

– A number of West African countries use middlemen to sell their oil to refineries. Do they really need these middlemen for their market expertise? Who are these middlemen? What do they charge? Are they put in place to siphon off some money for politicians?

– Trade unions are typically good sources to talk about working conditions, trends in the industry, trading and care for the environment.

– Strikes might severely affect the flow of oil. If you encounter a strike, found out how much the output is affect. If it isn’t, why not? What are the workers' demands? What are companies offering? How long will the strike last? How much oil might the market lose?

– The environment is typically neglected in oil discussions. Local citizens and health officials are good sources to document the impact of oil production on the environment.

– Nigeria and Angola are OPEC members with an output quota. How is that impacting their production? Are they holding back oil or would they produce beyond the output target?

Some basic math:

A. To calculate the percentage by which oil production has increased or decreased, take the latest output number, subtract it from the prior number and divide the result by the prior number. Multiply the result by 100 to convert it to a percent.
Example: In 2007, a country produced 2.5 million b/d. In 2006, it produced 2.8 million b/d.
2.5-2.8 = -0.3
-0.3/2.8 = -0.1071
-0.1071 x 100 = -10.7 percent
Because the result is negative (-) we say production has fallen by nearly 11 percent.

B. To calculate a country’s output as a percent of total global production, divide that country’s output by the total production.
Example: In 2007, a country produced 2.5 million b/d. Total production was 87 million b/d. Multiply the result by 100 to convert to a percent.
2.5/87 = 0.0287
0.0287 x 100 = 2.87 percent

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