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Impact of OPEC oil cuts will take time to be felt: IEA
September 22 2017, 06:19 | Irvin Gilbert
The reason hides in psychology of global trading. For the eleven non-Opec countries that are pledged to cut 558 kb/d of production, there is, as yet, far less data visibility. Also, sharp crude oil price movements in a short period of time determine inventory gains and losses for these companies. Thereby, the decreasing oil value does not reflect the strengthening of the United States dollars. The prompt heating oil spread went in the opposite direction trading to a 6-week high over -0.60 for a 60 tic rebound in two weeks. 5 items to understand the market.
"That helped overshadow yet another week-on-week increase to US crude production, but that aspect could be reinforced by the latest weekly rig count from Baker Hughes", due at 1 p.m.
Oil has settled below $50/bbl for the past six sessions, the lowest levels since November, as near- record USA crude stockpiles and increasing production weighed on the output reductions by the Organization of Petroleum Exporting Countries and non-OPEC producers. The Baker Hughes counted 617 active rigs, as in October 2015.
In Europe, gasoil stocks in the Amsterdam-Rotterdam-Antwerp hub had a modest weekly increase for the second straight week but are still lower y/y by 15 percent.
Last week Houston hosted the CERAWeek conference, one of the most important energy meetings in the world.
One curve ball: required advancements in vehicle fuel efficiency could come to a halt if President Donald Trump strikes a deal with MI automakers to bring more factory jobs to the U.S.in exchange for weaker environmental standards. The two countries have similar shares in world oil imports with China expected to edge ahead of the US going forward.
OPEC experienced pressure of diverse interests of the members. As agreed, Iran, Libya, and Nigeria have taken advantage of their exemption, seeing total output increase, since December (though output in Libya fell compared to January). Prior to the Vienna agreement production from Opec countries was increasing relentlessly; from September to November inclusive output surged by an estimated 580 kb/d.
Other major USA oil producers are in a similar position, creating considerable impetus for them to ramp up drilling and production, even with WTI at less than US$50 per barrel. Venezuela feels uncomfortable concerning the amount...
Goldman Sachs was unfazed by this news, citing Saudi assurances that the uptick in output was diverted into storage, and in any event, it would "be consistent with higher refinery runs locally in February". In 2030 Riyadh will benefit by the new Investment Fund, replacing the gap made by oil crisis. If Saudi Arabia returns to higher production levels in order to regain market share, crude will be moving well below $50 per barrel for quite a while. But an oil price rally after the deal has been hobbled by data showing persistently rising US stockpiles. New extraction techniques, such as fracking, allowed producers to access untold barrels of black gold never imagined by the oil bulls. Combine this with any rumblings that OPEC may not extend cuts past May 25, and market sentiment remains extremely volatile despite a record number of long positions in the crude market.