OPEC’s market monitoring committee reported that OPEC reached “120% compliance” with the production adjustments. It also reported that commercial OECD stocks had been reduced by 178 million barrels “since the beginning of the year.”
In reality, OPEC exceeded its collective production limit by about 850,000 b/d in September. It reported production at 32.748 million barrels per day, but that level must be adjusted to be comparable to the 32.5 million production ceiling it set last November.
To get a comparable figure, two adjustments must be made. Production from Indonesia must be added (740,000 b/d) because its output was included in the ceiling, notwithstanding it was dropping out. And production from Equatorial Guinea (140,000 b/d) must be deducted because it was not an OPEC member and its output was not included. Continue reading "OPEC's Fake Results and Upcoming Quagmire"→
According to OPEC, global OECD oil inventories fell 22 million barrels in June to end at 3.033 billion. But that figure is 252 million barrels above its five-year average. OPEC has targeted reducing those inventories to the average level, but its own supply-demand projections imply that goal will not be met through 2018, assuming it maintains production at the July 2018 level. In fact, there will be a 45 million barrel build in 2017, and an additional 162 million barrel build in 2018, even if production does not rise after the extension ends in March 2018. This implies that oil prices will need to be below marginal production costs for some time in order to limit production growth.
OPEC reported that production rose by 173,000 b/d in July to average 32.869 million barrels per day (mmbd). OPEC’s 32.5 mmbd ceiling included Indonesia but did not in Equatorial Guinea, and so the adjusted July figure was 33.449. This implies that OPEC produced 949,000 b/d above its ceiling, a large failure, especially considering that it had been claiming to be 100% (or more) compliant with its quotas. Continue reading "Oil Market Outlook Deteriorating With OPEC's Production Rise"→
On July 24th, Saudi energy minister, Khalid Al-Falih, announced that Saudi Arabia would limit its exports to 6.6 million barrels a day (mmbd) in August. He noted that other producers were still exporting larger volumes of oil than their production cuts imply.
“We are not doing this to allow other countries to free ride and undercut the agreement by overproducing,” said Mr. Al-Falih, reflecting a high level of frustration. Observers described Mr. Al-Fahil as “very nervous” over the weekend.
Saudi Energy Minister Khalid Al-Falih. PHOTO: IGOR RUSSAK/ZUMA PRESS
I believe he sensed or was advised that oil prices may drop precipitously if OPEC only reported continued-high compliance. Last Friday, John Kilduff had said this was a “make or break” meeting, and “that if nothing comes out of this meeting, the cartel and Russia will be punished mightily.” Continue reading "Analysis Of Saudi Export Reduction For August"→
U.S. oil inventories have increased by 20 million barrels since OPEC’s cut went into effect. Preliminary estimates of imports from OPEC members reveal an increase in the four-week trend of 77,000 b/d thus far in January from end-December. The largest increase, 148,000 b/d, was from Saudi Arabia.
I also observed that Saudi Arabia and Russia have masqueraded seasonal declines as their cuts. The Saudi cut of 486,000 b/d is a typical decline from production in the summer, when its domestic demand peaks. This year, instead of reducing its production after the summer, as it normally does, it waited until the OPEC meeting. (The graph below shows the seasonal decline in production from summer peak to the autumn in each year.) Continue reading "Why U.S. Crude Imports Might Not Drop Despite OPEC's Cuts"→
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