• 9 minutes WTI @ 67.50, charts show $62.50 next
  • 11 minutes The EU Loses The Principles On Which It Was Built
  • 19 minutes Batteries Could Be a Small Dotcom-Style Bubble
  • 2 hours Permian already crested the productivity bell curve - downward now to Tier 2 geological locations
  • 1 hour Saudi Fund Wants to Take Tesla Private?
  • 1 hour Desperate Call or... Erdogan Says Turkey Will Boycott U.S. Electronics
  • 4 hours CO2 Emissions Hit 67-Year Low In USA, As Rest-Of-World Rises
  • 14 hours How To Explain 'Truth Isn't Truth' Comment of Rudy Giuliani?
  • 12 hours Starvation, horror in Venezuela
  • 5 hours Saudi PIF In Talks To Invest In Tesla Rival Lucid
  • 10 hours Corporations Are Buying More Renewables Than Ever
  • 16 hours China still to keep Iran oil flowing amid U.S. sanctions
  • 15 hours Are Trump's steel tariffs working? Seems they are!
  • 16 hours Is NAFTA dead? Or near breakthrough?
  • 6 hours Film on Venezuela's staggering collapse
  • 2 hours China goes against US natural gas
Alt Text

Why Saudi Arabia Cut July Oil Production

Saudi Arabia’s oil production in…

Alt Text

Oil Demand Growth Starts To Weaken In Asia

Oil demand from Asia’s key…

Alt Text

EIA: U.S. Oil Production Growth Is Slowing

The EIA has revised down…

ZeroHedge

ZeroHedge

The leading economics blog online covering financial issues, geopolitics and trading.

More Info

Trending Discussions

OPEC Still Overproducing: Scapegoats U.S. Shale

offshore rig

In its just released latest market report for the month of July, OPEC admitted it has a problem: more than six months after the Vienna deal that was supposed to bring supply and demand in balance, the oil cartel confirmed it is pumping too much, not only in 2017, but that it was also set to produce too much oil in 2018, blaming shale production as the primary reason behind the oversupply.

First, looking at historical data, according to secondary sources, production among the 14 OPEC member states rose by a whopping +394k b/d in June to 32.611mb/d. The biggest monthly increases took place in those nations that had previously been supply constrained and which are exempt from the output cut accord: Libya +127k b/d, and Nigeria +97k, although even Saudi Arabia saw a substantial pick up in production, which rose by +51k b/d m/m to 9.95m b/d, the highest since the start of the year. More ominously, in direct communications to OPEC, Saudi reported a monthly increase of +190k b/d m/m, up to 10.07m b/d, suggesting that as discussed yesterday, Saudi commitment to production cuts may be "waning."

 

In total, OPEC admitted that output exceeded demand in 1H this year and was set for overproduction in 2018: the total output of 32.6m b/d in June was more than the 32.2m b/d it expects will be needed in 2018.

Just as striking was the report’s suggestion that OPEC and non-OPEC’s accord to cut production was not deep enough according to Bloomberg calculations: despite reducing production, the organization’s data show it oversupplied markets by ~700k b/d in 1H this yr. Still, surplus oil stockpiles in developed nations fell in May to 234m bbl; if OPEC maintains June output levels, it will reduce global surplus by ~70m bbl in 2H, although as we reported previously much of this is due to US oil exports which artificially depressed US commercial inventory stocks.

And the punchline: OPEC expects to oversupply global markets markets by ~900k b/d in 1Q next year, with US shale scapegoated as the culprit for OPEC's failure to bring the market back into equilibrium: Non-OPEC supply to grow by 1.14m b/d in 2018, up from 800k b/d in 2017. Related: Strong Demand Expectations To Lift Oil Prices

We wish OPEC the best of luck in getting US shale to produce less not more.

On the demand side, OPEC sees global oil demand rising 1.26m b/d, or 1.3% in 2018 to 97.65m b/d; its first estimate of 2018 demand growth was little changed from its unrevised forecast for 2017.

Discussing the demand side, the OPEC chief said the current oil-price cycle is driven by supply. OPEC's unwillingness to discuss the demand side may suggest to skeptics that it is not so much the supply side, which everyone knew would be in excess thanks to shale, but indeed the demand aspect, where OPEC is facing problems, especially in India and China, whose demand growth is now projected to decline, especially if as some have suggested China's SPR needs have declined sharply in recent months.

Meanwhile, as a first step to controlling what OPEC can control, namely supply, OPEC chief Barkindo said Libya and Nigeria are expected to send representatives to OPEC, non-OPEC Joint Technical Committee meeting in Russia on July 22, where according to some, they will be asked to also enforce production caps on their output, joining the rest of OPEC in limiting supply.

By Zerohedge.com

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment
  • Kr55 on July 12 2017 said:
    Endless zerohedge articles is IMO a sign that shorts are getting overextended. May be a good buying opportunity.

Leave a comment




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