According to the Kuwait News Agency, Kuwait Oil Minister Essam Abdul Mohsen Al-Marzouq, chairman of the Joint OPEC-Non-OPEC Ministerial Monitoring Committee (JMMC), has stated that February compliance by OPEC was 140%. But according to the figures that OPEC members submitted to the organization, compliance was just 42 percent, relative to the total OPEC ceiling (32.5) in the November 30th Agreement. If those figures are correct, this Agreement is in serious trouble.
Indonesia had been an OPEC member, and its volume (about 750,000 b/d) was included in the ceiling. But it dropped out, and so the new effective ceiling became 31.750 million barrels per day.
In the Agreement, the members chose to use “secondary sources” of their crude production to assess compliance. The idea was to have a more objective measure so individual members could not cheat by submitting low figures to make it seem as if they are complying. Continue reading "OPEC February Compliance 42%"→
Ministers from eleven Non-OPEC oil producing countries, led by the Russian Federation, met at OPEC’s headquarters in Vienna on December 11th. It had been reported for weeks that they would agree to cut their oil production by 600,000 b/d.
What they actually agreed to was a watered-down version of that. It turned out that they did not get to 600,000, that much of the “cut” was due to a natural decline in certain countries, such as Mexico, that Russia’s 300,000 b/d cut would be gradual over the first six months of 2017, and that it was all voluntary.
If you are having trouble keeping up with all of the rhetoric in the oil market over the past two months, you are not alone. That’s the oil producers’ basic idea, create as much uncertainty as possible in a bid to scare traders from shorting oil, thereby preventing oil prices from cratering.
Lead-Up to Algiers
Oil prices bottomed in mid-February, following the slide that had begun in June 2014. The trigger was a meeting between energy ministers from Saudi Arabia and Russia, along with a couple of smaller OPEC Gulf producers. They could not agree to a production cut, so they came up with a “freeze” proposal, whereby producers would agree not to increase production further.
Although this would not take one barrel of production out of the market, it was enough to spook traders who had large short positions to cover (buy). Random statements by producers created price spikes, and the resulting “headline risk” cause short sellers to progressively cover more and more positions. The effect was a sizable price rise. Continue reading "OPEC's Algiers Meeting"→
OPEC will hold its 169th Meeting in Vienna on June 2nd. Its tentative program calls for a press conference to be held at 1600 hours. Don’t expect the fireworks that followed its conference 18 months ago when Saudi oil minister al-Naimi declared a market share battle against North American shale producers. In fact, don’t expect much of anything.
A lot has happened since the last OPEC meeting in December. A strong El Niño resulted in record high temperatures in North America during the first half of the winter, undercutting prices. Poorer members, such as Venezuela and Nigeria, implored the group’s richer Gulf state producers to cut back to stop the hemorrhaging. Saudi Arabia refused to budge.
The sanctions against Iran were lifted in early January. Iran proclaimed it would restore lost production of 500,000 to one million barrels per day. Crude prices tumbled further and by mid-January had dropped to the mid-$20s. The market panic was in full-force. Continue reading "OPEC and Crude Futures Price Prospects"→
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