• 2 days Venezuelan Crude Exports To U.S. Fall To 15-year Lows
  • 2 days Mexico Blames Brazil For Failing Auction
  • 2 days Norway Allows Eni To Restart Goliat Oil Field In Barents Sea
  • 2 days Malaysia Suggests Muslim Countries Stop Trading Oil In U.S. Dollars
  • 3 days Kinder Morgan Wins Appeal To Start Trans Mountain Work
  • 3 days Mexico Cancels Deepwater JV Tender Due To Lack Of Interest
  • 3 days Oil Drillers Give Cold Shoulder To Alaska Bidding Round
  • 3 days Budweiser Bets On Tesla To Replace Its Fleet
  • 3 days Forties Pipeline And Nearby Terminal Disrupted After Oil Leak
  • 3 days Major Nigerian Union Threatens Strike After Mass Firing Of New Members
  • 4 days China’s Sinopec Sues Venezuela’s PDVSA Over Unpaid Debts
  • 4 days Chevron Cuts Total 2018 Capex, Boosts U.S. Shale Investment
  • 4 days Shell Idles Six Nigerian Power Plants After Gas Shortage
  • 4 days London Firms To Visit Saudi Arabia As Battle For Aramco Listing Continues
  • 4 days East Timor Is Running Out of Oil
  • 4 days Withdrawal From OPEC Deal Could Take 6 Months To Negotiate
  • 4 days India’s Largest Refiner Looks To Ditch Oil In Favor Of Renewables
  • 4 days Protestors Shut Down A Minnesota Wells Fargo Over Oil Investments
  • 4 days U.S. Energy Secretary Discusses LNG Exports To Saudi Arabia
  • 5 days China’s CNOOC Spends Big In Panic Hoard of LNG
  • 5 days Asia May Return To Mid-East Crude As Mexican Supply Tightens
  • 5 days Enbridge Restarts Controversial Line 5 After Shutdown
  • 5 days South Sudan Stills Owes $1.3B Oil Payments To Sudan
  • 5 days Oil Prices Fall After API Reports Huge Build In Gasoline Inventories
  • 6 days Rosneft Takes On Massive Debt As US Sanctions Mount
  • 6 days Kinder Morgan Announces Further Trans Mountain Pipeline Delays
  • 6 days API Announces Voluntary Methane Reduction Program
  • 6 days Statoil Plans $6B Development At Huge Arctic Oil Field
  • 6 days South Sudan Hopes Higher Oil Prices Will Restore Ravaged Economy
  • 6 days China Launches New Gas Pipeline Amid Soaring Demand
  • 6 days Total’s $16B Ultra-Deepwater Project In Jeopardy
  • 6 days OPEC’s November Output Drops 300,000 Bpd
  • 6 days Exxon’s Beaumont Refinery To Remain Partially Offline
  • 6 days Engie To Ditch Natural Gas By 2050
  • 6 days Aberdeen University Launches World’s First Oil Decommissioning Simulator
  • 7 days China Orders Regions To ‘Regulate’ Surging Natural Gas Prices
  • 7 days Exxon Looks To Enter Egypt’s Upstream Oil And Gas
  • 7 days Tax Bill Supports Oil And Gas Industry, API President Says
  • 9 days Blackstone Teams Up With Brazilian Partner To Buy $6B Gas Pipeline
  • 9 days Tesla Faces New Sales Challenges In Germany
Alt Text

Does OPEC Need An Exit Strategy?

While the OPEC production cut…

Alt Text

Rosneft Takes On Record Debt As U.S. Sanctions Weigh

Russia’s Rosneft has taken on…

Alt Text

OPEC’s Impossible Task

OPEC’s determination to keep output…

Matt Smith

Matt Smith

Taking a voyage across the world of energy with ClipperData’s Director of Commodity Research. Follow on Twitter @ClipperData, @mattvsmith01

More Info

Oil Rallies On Renewed OPEC Cut Hopes

whiting refinery

After a strong sell-off in recent days, option expiry combines with OPEC cut expectations to emphatically rally prices on this third Tuesday in November. Hark, here are five things to consider in oil markets today:

1) We said in the aftermath of the Algiers meeting that if an OPEC production cut were to be forthcoming, Saudi Arabia would have to do the heavy-lifting. A production cut still appears a likely scenario, as does some back-breaking work by Saudi.

With the OPEC meeting in Vienna in fifteen days, the cartel is entering the final stretch of diplomacy, via the medium of closed-door meetings. The situation for OPEC has only become more complicated since the end of September, however.

Libyan oil production is on the rise, exhibited via their increased exports both this month and last (hark, at 550,000 bpd so far in November, according to our ClipperData). And despite reports of a renewed surge in sabotage in Nigeria, export loadings have clambered above 2 million barrels per day so far in November. Exports for the two are up over 1mn bpd compared to September:

(Click to enlarge)

2) Rising OPEC production means that the cartel is going to have to dig even deeper in terms of production cuts. At the time of the Algiers meeting, the latest data showed OPEC producing 33.237mn bpd. Last week's November report from OPEC pegged production at 33.64mn bpd - a record.

This is reflected in the middle bar below; the cartel has to cut by at least 0.64mn bpd, or by 1.14mn bpd, depending upon the production target they choose (32.5mn bpd or 33mn bpd). Including a rebound in Angolan production (as well increasing flows from Libya and Nigeria, as highlighted above), the cartel is going to have to cut by an even larger amount.

(Click to enlarge)

3) The current sticking point for the cartel appears to be Iraq, and Iraq's discontent with both freezing their production, and the low estimate of their production by secondary sources. Saudi appears unwilling to waive Iraq's participation in the cuts - but may have to back down on this front if it wants a deal pushed through.

The reason Saudi Arabia has been willing to make a concession with Iranian production seems to lie with their belief that the Persian Gulf state is unable to increase materially from here. Iranian oil exports continue to climb, however - something we have highlighted in recent days. Iran's exports into Asia have now climbed to over 2.2mn bpd - way higher than their total exports at the start of the year:

(Click to enlarge)

4) The chart below is from a piece addressing the question as to whether low oil prices are good or bad for the economy. We discussed this a few months ago, driven by the statistic that consumption has been boosted by 0.61 percent due to higher discretionary income (h/t lower gasoline prices), while investment has dropped by 0.62 percent due to lower drilling activity.

With the overall U.S. economy having less economic dependence on oil - and less vulnerability to its price changes - the U.S. is less exposed than most, as the chart lower right shows. Nonetheless, as the stat above illustrates, the positives and negatives basically cancel each other out.

(Click to enlarge)

5) Finally, the below chart shows how the Permian Basin now has nearly as many active oil rigs as the rest of the United States combined (including offshore rigs too). The EIA attributes the increase in the Permian due to higher M&A activity, which in itself was bolstered by rising prices in Q2, as well as improving credit conditions - spurring on positive sentiment the upstream oil sector.

(Click to enlarge)

By Matt Smith

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment
  • Mark Taylor on November 15 2016 said:
    All of that adds up to more production, not a cut. This is a dream.

Leave a comment




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