The Global Perspective For Petroleum In 2002 & The Role Of OPEC.

** The Economic Slowdown And The Sept. 11 Attack Have Caused The Price Of OPEC's Basket Of Seven Crude Oils To Fall In 2001 From Almost $30 To Less Than $17/Barrel

** Differentials Between Spot WTI & D. Brent Narrowed To '01 Record Of $0.18 On Nov. 26, When Spot Dubai Traded At $15.59 - $2.86 Below D. Brent; But The Dubai Discount Fell To $0.54 On December 10

** Price Forecasts For 2002 Average $19.56, Ranging From 17.50 Put By Purvin & Gertz To $24.50 Seen By Societe Generale Equity Research

The instigator, and most of the pilots, of the world's most fateful event in 2001 emanated from the leading member-country of OPEC. One of the most critical factors to the world economy in 2002 will depend on OPEC. Petroleum will remain the most important element in the global energy balance.

Apart from trying to defend the oil price, the OPEC world in 2001 had three momentous developments: a reversal of reforms in the petroleum E&P business in Venezuela which will only hurt the Venezuelans eventually, a worsening of political rivalry in Iran which will lead to more transparency in Tehran's dealings with local and foreign oil companies (see review of OPEC's 11 member-states on the following pages), and a potentially explosive power struggle in Saudi Arabia caused by the Sept. 11 terrorist attack on the US - an attack which brought about a shift in Washington from the intellect to the instinct (see News Service of this week's APS Diplomat package).

In trying to defend the oil price, OPEC (excluding Iraq) in 2001 had to announce cuts in oil output by a total of 3.5m b/d to a Sept. 1 target of 23.2m b/d. Because of the global recession in the aftermath of Sept. 11, OPEC suspended its $22-28/b price band mechanism.

With world demand falling and non-OPEC oil exporters gaining market share at its expense, OPEC came up with the following decision at its Nov. 14 ministerial conference: OPEC will lower production by 1.5m b/d for the first half of 2002 but only if non-OPEC supply is cut by another 500,000 b/d for the next six months.