OPEC’s Barkindo with a definite kiss of death comment
- Non-OPEC countries are having some challenges monitoring production cuts
- Non-OPEC is lagging behind OPEC members conformity but remain committed
- Will review production agreement and exemptions at the end of the 6 month period
So the cracks in the deal are appearing, and mainly from non-OPEC producers. Who didn’t see that one coming? Maybe they’ll be up to speed by about the end of June, just in time to reverse it all 😉
Spoiler – because higher prices would attract more supply
- Crude above $60 would ultimately hurt OPEC because it would spur competitors to boost production and trigger medium-term price decline
- Zanganeh spoke after meeting Russian Energy Minister Alexander Novak
Comments reported by Iranian Students News Agency, via Bloomberg
In November 2016 OPEC and eleven non-OPEC nations pledged to cut production by an additional 558,000 barrels a day.
US officials see pickup in oil
The US will surpass 9 million barrels per day of oil production in the coming weeks, according to the US Energy Information Administration.
Their drilling productivity report show share production rising 79K bpd to 4.83 mbpd in the biggest rise since October.
- Bakken oil to fall 18K bpd
- Eagle ford to rise 14K bpd
- Permian basin to rise 70K bpd
After challenging the top end of the recent range on Friday, oil has slipped $1 to $52.87 today.
Head of NIOC exploration reports 30 billion barrel find
Press TV reports comments from the head of exploration at the National Iranian Oil Company who says the national oil company has found 30 billion barrels of oil, about 4.7 billion of it discoverable.
What’s unclear based on the initial report is if this is a new announcement or repeating past announcements. The official said the discoveries took place over the past four years, so this is most likely a rehash.
Seyyed Saleh Hendi, the head of exploration, also reported on 128 trillion cubic feet of newly discovered natural gas.
One part of the OPEC production deal isn’t going according to plan
The main reason for the OPEC deal was to freeze production so that demand eats into the glut of supplies. That’s all well and good until the glaring floor in the plan comes home to roost, i.e demand doesn’t grow or worse, it drops.
So when one of the fastest growing countries sees oil demand fall the most in 13 years, there should be alarm bells ringing at OPEC.
Bloomberg has noted the drop which has seen India’s use of diesel drop 7.8% in Jan. Diesel accounts for around 40% of total fuel use. India also imports around 80% of it’s oil and the IEA said it will be the fastest user of oil through to 2040.
The drop is being tied in with the recent policy crackdown on high value bank notes, which is expected to shrink economic growth. One analyst expects that this is a one off and demand will pick back up in Feb. We’ll see whether he’s right no doubt. If he’s not then this could be a bigger issue for OPEC who will start to think about what to do with the current deal in a couple of months or so.
For me, the demand part of the OPEC puzzle was always the weak link and if demand doesn’t match expectations in relation to this deal, there’s going to be strong calls to expend it.