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The OPEC Deal Looks Destined To Fail

Oil

Friday June 9, 2016

In the latest edition of the Numbers Report, we’ll take a look at some of the most interesting figures put out this week in the energy sector. Each week we’ll dig into some data and provide a bit of explanation on what drives the numbers.

Let’s take a look.

1. Inventories decline…and rise again

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- The key objective for OPEC at this point is to drain crude oil inventories around the world, and particularly in the United States.

- The EIA offered a damning projection this week, predicting stock drawdowns of just 200,000 barrels per day on average in 2017, which will be painfully slow and wholly inadequate for correcting imbalances.

- Worse, the EIA sees inventories actually rising once again in 2018.

- The culprit is growing non-OPEC production – that is, surging U.S. shale output but also new supply from places like Canada and Brazil.

- The EIA forecasts Brent prices of $54 per barrel in the third quarter.

- Of course, the prediction that inventories will surge in the second quarter of 2018 is based on the assumption that the OPEC deal will expire. As it stands, that is exactly what will happen, but OPEC could always extend the deal again.

2. EV sales surge

(Click to enlarge)

- The cumulative number of EV sales has surpassed 2 million last year, according to the IEA, up from nearly zero as recently as five years…

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