• 6 minutes Will the trade war hurt US project builds? Not if the US does it right.
  • 12 minutes OIl Targets from Experts to $300, vs. imho $52
  • 18 minutes Oil prices going down
  • 6 hours Germany: We Can No Longer Fully Rely On U.S. White House
  • 9 hours U.S. Challenges 5 WTO Members imposing Illegal Tariffs Against U.S. Products
  • 3 hours Venezuela, the largest oil reserve in the world, faces deep shortages of motor oil
  • 4 hours Well from $74 we hit 67.xx now what?
  • 7 hours Chile Becomes The Latest Country To Commit To 100% Renewables
  • 3 hours Does S Arabia Have 2 Mln Barrels in Spare Capacity?
  • 1 hour Where 3 Million Electric Vehicle Batteries Will Go When They Retire?
  • 7 hours Trade War of 1930s, Extended the Great Depression
  • 12 hours Ireland Exits Fossil Fuels
  • 2 hours Rio Tinto Says $4-Million Goodbye to Coal
  • 6 hours Kaplan Says Rising Oil Prices Won't Hurt US Economy
  • 11 hours Is Libya the current Iran for oil markets?
  • 9 hours Apple's $300 fund in China
  • 10 hours Iran's President Warns Over U.S. Push For Countries To Stop Buying Oil From Iran
  • 9 hours Total Trade War: U.S. Threatens Tariffs On $200 BN of China Goods
Alt Text

Trump Is Fracturing OPEC

The aggressive anti-Iran campaign from…

Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

More Info

Trending Discussions

Can OPEC Deal With Its Success?

OPEC logo

The 2017 data is in: OPEC’s success with its oil production cuts is now proved. In fact, the cartel and its partners — led by Russia — did so well that there are calls from analysts to consider making it permanent. But … there’s always a but.

It’s no secret that the excellent performance of OPEC and its partners wasn’t exactly excellent across the board. Some members did more than their fair share, and others didn’t hit their quota at all, in any month.

Take the top performers, Saudi Arabia and Venezuela. The former cut more than it had to in order to make up for laggards like Iraq, whose compliance was consistently lower than that of most other members. Venezuela, for its part, also overcomplied, but not by choice. Its oil production dropped sharply in the last couple of years under the pressure of field mismanagement, underinvestment, and U.S. sanctions.

Angola also overcomplied, which helped push OPEC’s total compliance rate above 100 percent last year. This impressed the market and helped crude oil benchmarks break resistance levels and gradually climb to the coveted $60-a-barrel mark. This achievement is all the more impressive in light of the fact that two large OPEC producers — Libya and Nigeria — did not take part in the cuts because they were in active oil industry recovery mode. As a result of this recovery, Bloomberg Gadfly’s Liam Denning notes, they offset one in four barrels that the rest of OPEC took off the market last year. Related: Goldman: Oil To Top $80 Within Six Months

In total, the 2017 production cut amounted to 438 million barrels — enough to take care of the global overhang. But does OPEC and its partners have what it takes to continue at the same rate? Prices are a particularly good motivator, although as it turns out, prices that are too high are equally as unwelcomed.

When Brent broke the $70 barrier, there was talk that OPEC and Russia might want to wrap things up in June rather than in December for fear shale boomers will, well, boom, undermining their market share.

These worries had a solid basis: Drilling in the United States is indeed booming, and now Canadian drillers are also moving south to respond to the demand for new wells. The U.S. will hit the 10-million-bpd mark very soon: last week, the daily average stood at over 9.9 million bpd. But OPEC’s hands are pretty much tied, because any suggestion of a premature end to the cut deal immediately hits prices. And while this would hurt both OPEC and U.S. drillers, it would hurt OPEC more.

So, OPEC is stuck with the deal, raw as it may be, especially as members such as Saudi Arabia and Kuwait plan hefty oil investment programs for the medium term. These programs require oil prices to remain higher, to which end OPEC will need to continue pumping less as the U.S. pumps more. Of course, there is a good chance that OPEC and Russia will devise a gradual exit strategy that will see the deal end when it is supposed to. There’s also a good chance that it will be extended again because it’s working so well.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News